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Glass VA S ^ ') b \ lo 
Book L_K 53 , 



^ 



FEDERAL TRADE COMMISSION 



APPLICATIONS, ANSWERS 

AND STATEMENTS 

CONCERNING THE SO-CALLED 

PITTSBURGH BASING POINT 
FOR STEEL 



96"^ 



OCTOBER 15, 1919 




)C|_^n G 11 



WASHINGTON 

GOVERNMENT PRINTING OFFICE 

1919 



4^ 



x'-" 



John Feanklin Foet, Chairman. 
ViCTOE Mtjedock, 
HtrsTON Thompson, 

WttLIAM B. COLVEE. 

J. p. YoDKK, Secretary. 



n. of -. 



TABLE OF CONTENTS. 



APPLICATIONS. 

Pag*. 

Western Association of Rolled Steel Consumers 3 

Superior Commercial Club 22 

State of Minnesota 31 

Civic Organizations of Du'uth 33 

Southern Association of Steel Fabricators 49 

Birmingham Civic Association and Birmingham Steel Base Bureau 52 

ANSWERS. 

United States Steel Corporation, etc CI 

Steel & Tube Co. of America 65 

Inland Steel Co 68 

Interstate Iron & Steel Co 73 

STATEMENTS FROM OTHERS THAN APPLICANTS FAVORING APPLICATIONS. 

Southern Bridge Co 78 

McVoy Sheet & Tin Plate Co 78 

Bailey-Burruss Manufacturing Co 79 

Cary Safe Co 81 

Fuller & Sons Manufacturing Co 81 

Gibbes Machinery Co 82 

Navy Department 82 

Carbo Steel Products Co 84 

Great Western Manufacturing Co 85 

United States Railroad Administration 86 

E. C. Adams 87 

J. H. Williams & Co 89 

Chattanooga Roofing & Foundry Co 92 

Gemco Manufacturing Co 92 

Brunswick Marine Construction Corporation 93 

Tomlin-Harris Machine Co 94 

Salem Iron Works 94 

Lombard Iron Works & Supply Co 95 

Ridden Bros. (Inc.) 96 

Oscar Daniels Co 96 

Athens Foundry & Machine Works 97 

War Department 98 

Southern Iron & Equipment Co 98 

J. S. Schofield's Sons Co 99 

Carolina Wholesale Hardware Co 100 

Johnson Iron Works (Ltd.) 100 

Valk & Murdoch Co 101 

Birmingham Steel Corporation 101 

Montgomery Coal Washing & Manufacturing Co 103 

(3) 



Page. 

White Hickory Wagon Manufacturing Go 103 

Perfection Mattress & Spring Co 104 

Steward-Hilty Machine Co 104 

Crescent Bed Co. (Ltd.) 105 

Johnson City Foundry & Machine Co. (Inc.) 105 

Casey-Hedges Co. (Inc.) 106 

Henderson Shipbuilding Co. (Inc.) 107 

STATEMENTS FROM OTHERS THAN RESPONDENTS OPPOSING APPLICATIONS. 

N. & G. Taylor Co 108 

Gulf States Steel Co 109 

Lackawanna Steel Co 116 

Jones & Laughlin Steel Co 122 

Union Drawn Steel Co 127 

Kokomo Steel & Wire Co 129 

National Bolt & Nut Co 132 

Donner Steel Co. (Inc.) 183 

W. A. Ceilings Co 134 

Weirton Steel Co 137 

'Wheeling Steel & Iron Co 141 

Central Tube Co ^ 142 

Indiana Bridge Co 144 

Republic Iron & Steel Co 145 

Morris & Bailey Steel Co 148 

Youngstown Sheet & Tube Co., of Youngstown, Ohio 148 

Chamber of Commerce of Pittsburgh 150 

Stark Rolling Mill Co _. 151 

Mansfield Sheet & Tin Plate Co 1 152 

Atlantic Steel Co 154 

West Virginia Rail Co 156 

Crawfordsville Wire & Nail Co 157 

Reading Iron Co 158 

Bethlehem Steel Co 158 

Trumbull Steel Co., of Warren, Ohio 167 

Eastern Steel Co 170 

McKeesport Tin Plate Co 172 

American Steel Co 172 

Superior Steel Corporation 173 

Pittsburgh Steel Co 174 

Knoxville Iron Co 175 

Carnahan Tin Plate & Sheet Co 176 

Chamber of Commerce of Steubenville, Ohio 177 

Chattanooga Chamber of Commerce Industrial Board 178 

Page Steel & Wire Co 179 



APPLICATION OF THE WESTERN ASSOCIATION OF ROLLED STEEL CONSUMERS. 



[The application by the Western Association of Rolled Steel Consumers for a complaint 
against the United States Steel Corporation, and its subsidiary companies hereinafter 
named ; and the Inland Steel Co. and the Interstate Iron & Steel Co., and the Steel & 
Tube Co. of America.] 

To the Federal Trade Commission, 

Washington, D. C: 

The Western Association of Eolled Steel Consumers, a voluntary 
association, whose address is at room 1305, City Hall Square Build- 
ing, 139 North Clark Street, Chicago, 111., respectfully makes appli- 
cation to the Commission to institute a proceeding in respect to the 
violations of law hereinafter mentioned, over which the Commission 
has jurisdiction, by the corporations hereinafter named; and for 
that purpose to issue a complaint directed against the United States 
Steel Corporation, a corporation organized under the laws of the 
State of New Jersey, having its principal offices and address at 71 
Broadway, in the city of New York, and its subsidiary corporations 
liereinafter named, and whose respective addresses are at No. 71 
Broadway, in the city of New York; the Inland Steel Co., whose 
address is at No. 38 South Dearborn Street, Chicago, 111.; and the 
Interstate Iron & Steel Co., whose address is at No. 104 South Michi- 
gan Avenue, Chicago, 111.; and the Steel & Tube Co. of America, 
whose address is at No. Ill West Washington Street, Chicago, Ill.j 
on the grounds of unlawful restraint of trade and of price discrimi- 
nation, contrary to the provisions of the antitrust acts, and in par- 
ticular of section 2 of what is known as the Clayton Act of October 
15, 1914; and of unfair competition in trade, contrary to the provi- 
sions of section 5 of the Federal Trade Commission act of September 
26, 1914, against the constituent members of the petitioners' asso- 
ciation, and to their injury in their business and against and to the 
injury of other steel fabricators operating in that portion of the 
United States that comprises generally the Central, Western, North- 
western, and Southwestern States, and their trade and customers, 
and all other consumers of products of rolled steel which are increas- 
ingly called for and needed and used in the rapid and growing 
deA^elopment of the Middle West and the territory tributary to the 
Chicago district hereinafter referred to. 

Petitioner association is composed of upward of 700 fabricators 
of steel, engaged in the manufacture and sale in interstate commerce 
of products of which rolled steel is a constituent part, and operating 

(5) 



in the States of Illinois, Indiana, Michigan, Wisconsin, Minnesota, 
Iowa, Kansas, Missouri, Montana, Nebraska, Oklahoma, South 
Dakota, Texas, Utah, Washington, Wyoming, Colorado, and Cali- 
fornia, all being tributary to' what is known in the trade as the 
" Chicago District." 

The United States Steel Corporation, respondent, through its 
subsidiary companies, which it owns and controls, among which are 
the Illinois Steel Co. and the Carnegie Steel Co., and such sub- 
sidiai'y companies under its dii'ection and control, are and have been 
for a considerable time engaged in the production and sale in inter- 
state commerce of rolled iron and steel, including plates, shapes, 
sheets, and bars, and other products of their rolling mills, having one 
of their principal producing plants at Gary, Ind., and operating 
other steel-producing plants at South Chicago, in the city of Chicago, 
and at Joliet, 111. ; Duluth, Minn. ; Milwaukee, Wis. ; Pittsburgh. 
Pa. ; and elsewhere. 

That the rolled-steel made in the Chicago district by respondent, 
United States Steel Corporation, through its subsidiary companies, at 
Chicago, and Joliet, 111., and at Gary, Ind., and by respondents, 
Inland Steel Co., at Indiana Harbor, Ind., and by the Interstate 
Iron & Steel Co., at East Chicago, Ind., and the Steel & Tube Co. of 
America, at Indiana Harbor, Ind., is produced at a cost substantially 
lower than at the Carnegie plant of the United States Steel Corpora ■ 
tion at Pittsburgh, Pa., or a-t other plants at Pittsburgh or at other 
places east of Gary or elsewhere, and that over one-fifth of the rolled 
steel made in the United States is made by the respondents at Gary, 
Ind., which is distant not more than 30 miles by rail from Chicago ; 
at Joliet, which is about 40 miles from Chicago; East Chicago and 
Indiana Harbor, which are between Chicago and Gary; while Pitts- 
burgh, Pa., is distant from Chicago substantially 500 miles. That 
among the reasons for the reduced or favorable cost of producing 
rolled steel at Gary and at Chicago, Joliet, East Chicago, and 
Indiana Plarbor as compared with the cost of producing rolled steel 
at Pittsburgh or elsewhere are the shortness and directness of the all- 
water transportation of ore from the mines in Minnesota to their 
mills in the Chicago district and of their proximity to coal. 

That Gary, Ind., is already the second largest producing district 
of rolled iron and steel and is the only large producer of practically 
the entire line of steel products outside of the Pittsburgh district. 

That said very large Gary plant of the United States Steel Cor- 
poration was constructed in and from time to time since the year 
190C, and was there constructed and from time to time enlarged in 
view of its favorable location for the economical production of rolled 
steel and its proximity to the market of the great consuming territory 



of the rapidly growing Middle West and territory tributary thereto, 
in the development of which there has been and will be a rapidly in- 
creasing need and demand for iron and steel products, and the estab- 
lishment in such district and territory of numerous and extensive 
industries for their fabrication to meet such demand. Applicant is 
informed and thereon states that the plants of the respondents at 
Gary, Chicago, Joliet, East Chicago, and Indiana Harbor have from 
time to time been rapidly enlarged and are now in course of further 
extensive enlargements. In 1917, the year [for] which the last official 
statistics were accessible, about 86 per cent of the entire production of 
iron ore came from the Lake Superior district, while 10 per cent 
thereof came from the Birmingham district, 2J per cent from the 
three States of Pennsylvania, New York, and New Jersey, and 1} 
per cent from Colorado. That the greatest normal growth and in- 
crease in iron and steel production under peace conditions will natu- 
rally and normally be in and about Chicago, where the great plants 
at Gary, Chicago, Joliet, East Chicago, and Indiana Harbor are 
located, by reason of the cheaper cost of production thereof than at 
other places ; and that the principal natural and normal growth and 
increase of the consumption and demand of iron and steel and their 
products now is and will be in the Middle West and the territory' 
tributary to the Chicago district. 

The applicant submits that the normal and reasonable price for 
rolled steel should be measured by the cost of production, with the 
addition of a reasonable profit, without the addition of a large and 
arbitrary increase, which forms no part of the cost of production 
and is over and above such reasonable profit. The district and terri- 
tory in which the factories of the members of the applicant asso- 
ciation are situated is tributary to the location of the mills at or 
near Chicago, where rolled iron and steel are produced at the lowest 
cost and where and to and from which the greatest and the shortest 
facilities for transportation from mill to consumer are and will 
continue to be furnished. 

The application of the principle of price fixing at cost plus a 
reasonable profit and of the law of supply and demand requires that 
the price of rolled steel in the Chicago district should be as low 
as and not greater than the price at any other point or in any other 
district in the United States. The fixing of any higher price for 
rolled steel produced in that district is arbitrary, artificial, unrea- 
sonable, and uneconomical, and gives to the respondent producers 
excessive and unreasonable profits. 

It is submitted that if basing points are economically sound, 
then, in the interest of the trade — of consumers and producers and 
of the districts or sections to be served and affected— their selection 



8 

should take into view their situation with respect to cost of pro- 
duction, supply, and proximitj' to existing and growing greater 
demand under normal and natural conditions. In any proper con- 
sideration of the question, the applicant maintains that if a basing 
point or basing points are to be considered as proper and recog- 
nized, Chicago best answers all the conditions and should be a 
basing point. 

Among the powers of the Commission is the following (under 
which, it is submitted, the Commission may properly inquire into 
all the facts, situations, and questions bearing upon the issues and 
questions presented by this applicant) : 

To gather and compile information concerning, and to investigate from time 
to time tlie organization, business, conduct, practices, and management of any 
corporation engaged in commerce, excepting banlis and common carriers sub- 
ject to tlie act to regulate commerce, and its relation to other corporations and 
to individuals, associations, and partnerships. 

In support of this application, your petitioner sets forth the fol- 
lowing facts as constituting the violations of law complained of : 

1. That said United States Steel Corporation and its subsidiary 
company, the Illinois Steel Co., acting under its control and dii'ection, 
and said the Inland Steel Co. and the Interstate Iron & Steel Co. 
and the Steel & Tube Co. of America, aforesaid, upon sales in inter- 
state commerce for use, consumption, or resale within the United 
States, are and since on or about the 1st day of July, 1918, have 
been, charging to the members of the petitioner association and 
to other purchasers in the States mentioned in paragraph 1 hereof, 
for rolled steel consisting of iron and steel plates, shapes, sheets, and 
bars, and other rolled-steel products of their respective mills, which 
are by them rolled and manufactured and delivered at or shipped 
from their said respective rolling mills situated at Gary, Indiana 
Harbor, and East Chicago, Ind. ; and Chicago Heights, and Joliet, 
111., at a price which is fixed by adding to the proper price thereof 
as measured by the cost of production plus a fair and reasonable 
profit, the amount of the railroad freight charges or cost of trans- 
porting such commodities from Pittsburgh, Pa., to Chicago, or to 
the destination where they are to be received by the purchasers, 
respectively, less the freight charges from the plants of such pro- 
ducers to such destination, as if such commodities were in fact 
shipped from Pittsbui'gh, instead of being shipped from their re- 
spective mills at Gary, Chicago, Indiana Harbor, East Chicago, or 
Joliet, as the fact is. 

In other words, the prices of such commodities are increased by 
large fictitious freight rates, which amounts to $5.40 per ton or 
thereabouts, and which are not incurred or paid an^i a^ve not any- 



9 

proper element or part of the price of such commodities, but are 
an arbitrary and excessive and unreasonable addition thereto. 

2. That many of your complainants, members of the petitioner 
association, are competitors in business in interstate commerce of 
other fabricators in what is known as the Pittsburgh district or 
in the States east of Indiana, who have been during the same period 
and are also purchasers in interstate commerce from respondents 
of like commodities, and to such competitors the said respondents 
have been and are selling such commodities at prices substantially 
less than the said prices by them exacted from and paid by the 
members of the applicant association as aforesaid. 

3. That the respondents during said period have been and are 
selling such commodities to such competitors at Pittsburgh and in 
the Pittsburgh district of the complaining members of the appli- 
cant association f. o. b. Pittsburgh and at prices less by the amounts 
of the ruling freight charges on like commodities from Pittsburgli 
to Chicago, or by substantially that sum, than the prices so made to 
the members of the applicant association or other fabricators or 
consumers located in the Chicago district, or in the territory tribu- 
tary thereto, for like commodities produced at Gary, Chicago, 
Joliet, East Chicago, and Indiana Harbor. 

4. The respective respondents engaged in interstate commerce 
thus, as applicant charges, discriminate in price of such comiuodities 
(which commodities are so sold for use, consumption, or resale 
within the United States) in favor of such competitors of the mem- 
bers of the applicant association who are located in the Pittsburgh 
district or in the territory east of the Chicago district and against 
the members of the applicant and other consumers of rolled-steel 
products located in the Chicago district or in the territory tributary 
thereto. 

5. That the effect of such discrimination in price is to cause to 
and impose upon the respective members of the applicant with 
respect to sales or attempted sales by them of their products to cus- 
tomers in the Pittsburgh district, or in the territory east of said 
Chicago distiict, the great cost or sum amounting to such fictitious 
freight rate fi'om Pittsburgh to Chicago, in addition to the cost of 
transportation of their own product from their mills to their cus- 
tomers in the Pittsburgh district or territory east of Indiana, and 
thereby practically to exclude them from such trade in competition 
with fabricators located in said Pittsburgh or eastern district or 
territory, while but for such discrimination in price they could and 
would successfully compete with such eastern competitors for and 
receive and enjoy profitable trade in such district east of such 
Chicago district, particularly in that portion thereof lying nearer 



10 

or as near to Chicago as to Pittsburgh from which they are now so 
practically excluded. 

6. The further effect of such discrimination in price (while so 
practically excluding complainants, members of the applicant here, 
from such eastern market) is to enable and permit their said eastern 
competitors (purchasing such commodities from respondents f. o. b. 
Pittsburgh and at such lower ]Drice than members of the applicant 
can purchase, as aforesaid) to ship and deliver their products to 
purchasers thereof in the Chicago district at a cost or expense lower 
than or practically as low as the members of the applicant can or 
could ship and deliver their products to such purchasers, and so to 
compete on equal terms with the members of the applicant association 
for the trade in the territory of such members. 

And so the applicant charges that the fact that such Chicago dis- 
trict fabricators of steel are obliged to pay for rolled steel purchased 
of the respective respondents and produced at. their mills in said 
Chicago district in accordance with this single Pittsburgh base 
price, i. e., a price equal to the Pittsburgh price of the commodity 
plus a sum equal to the freight charge per ton from Pittsburgli to 
the point of destination (although, in fact, no such freight charge 
is actually incurred), deprives such consumers of rolled steel in the 
Chicago district from enjoying the advantage to which they are en- 
titled [because] of their proximity to the real producing points at 
Gary, Ind., and elsewhere in the Chicago district, and arbitrarily^ and 
unjustly discriminates against such consumers in said Chicago district 
in so excluding them from competing for business with those fabri- 
cators who are in or tributary to the Pittsburgh district and the 
East, and in enabling siich eastern fabricators at the same time to 
compete on unfairly advantageous terms in trade with the fabrica- 
tors in the Chicago district as if the plants of such eastern fab- 
ricators were in the Chicago district. 

7. The discrimination in price and disadvantage so suffered by 
the fabricators and consumers of rolled steel in the Chicago district 
is not a natural one and is not due to their geographical location or 
remoteness from adequate mills of supply. Under the play of the 
natural and normal forces governing supply and demand (which 
has already led to the development of the steel industry there) , and 
with the removal of the artificial conditions due to such complained 
of discriminations, the supply in such Chicago district of I'olled 
steel and rolled steel products will accommodate itself to and meet 
the demand therefor. 

8. That such increase in cost of rolled steel increases the cost and 
selling price of everything involving its use, and not only the fabri- 
cators in the Chicago district but their customers, and all who con- 



11 

sume or use the products of steel in that section of the country, are 
wrongfully and prejudicially affected by this compulsory increase 
in price of the products they purchase caused by such artificial in- 
crease in price of rolled steel; and that such discrimination in price 
is against and unfair and unjust and prejudicial to such territory 
constituting the Chicago district and the business and trade thereof 
and in favor of said Pittsburgh or eastern district. 

That this arbitrar}^ increase in price amounts in the case of Chi- 
cago contracts at the present time to $5.40 per ton or thereabouts, 
even though the rolled steel used in fulfilling orders from the said 
Chicago district is produced at the mills of the respondents situated 
at Gary, Indiana Harbor, or East Chicago, Ind., or at Chicago, or 
Joliet, 111., — ^mills in the Chicago district territory that are con- 
trolled by respondents. 

9. That to meet the said Pittsburgh base jprice the respondents, 
who have mills in the Chicago district, make prices and sell to pur- 
chasers in the Pittsburgh district or in territory between the east 
line of Indiana and Pittsburgh, who are competitors of the members 
of applicant, at prices of the Pittsburgh mills and themselves absorb 
the freight rate from their mills to the purchaser's plant, and thus 
discriminate in price to the amount of several dollars per ton in 
favor of such competitoi's s^nd against applicant's members. 

10. That the respective respondents do not in all cases or uniformly 
maintain or charge such Pittsburgh base price but have practiced 
and made and do make other discriminations in price in favor of 
certain customers in the Chicago district, viz : 

Thcj have quoted and made and do quote and make, as applicant 
is informed and charges, to and in favor of all or certain agricul- 
tural implement manufacturers, and to certain other consumers and 
purchasers in order to secure orders, prices f. o. b. Chicago or f. o. b. 
mill for such rolled steel, which is less by said addition of $5.40 per 
ton or thereabouts than the prices exacted from the members of the 
applicant. 

They have quoted and made and do quote and make prices to rail- 
road companies for rails, angle bars, splice bars, and tie plates f . o. b. 
Chicago or Pittsburgh or f. o. b. mill. They quote and sell basic 
pig iron at the same price f. o. b. Chicago and f. o. b. Pittsburgh. 

Applicant submits that such practices, besides constituting dis- 
criminations in prices, show that such price fixing f. o. b. Pittsburgh 
solely, which is herein complained of, has no trade or economic rea- 
son or basis, 

11. That the effect of the discriminations in price aforesaid may 
be and is to substantially'^ lessen competition and tends to create a 
monopoly in the said line of commerce. 



12 

12. That the said respective discriminations in price between pur- 
chasers of such commodities are not on account of differences in the 
grade, quality, or quantity of the commodity sold and do not make 
only due allowance for difference in the cost of selling or transporta- 
tion, nor are such discriminations made in good faith to meet compe- 
tition. But they are made by agreement, or understanding amount- 
ing to agreement, between the respondents and other producers of 
steel in order to maintain prices of rolled steel, and particularly to 
maintain such increased and unreasonable prices in and throughout 
said Chicago district to the members of the applicant and other con- 
sumers therein. 

13. The applicant charges and submits that the respective respond- 
ents above named — -the United States Steel Corporation, the Illinois. 
Steel Co., the Carnegie Steel Co., the Inland Steel Co., the Interstate 
Iron and Steel Co., and the Steel and Tube Company of America — in 
the course of their said commerce, in the acts and respects herein- 
above set forth, have discriminated and are discriminating in price 
between different purchasers of commodities, which commodities are 
sold for use, consumption, or resale within the United States where 
the effect of such discrimination may be to substantially lessen com- 
petition or tend to create a monopoly in the line of commerce herein- 
before mentioned. 

14. The applicant further charges and submits that the acts of the 
respondents above set forth and complained of use, cause, and bring- 
about and constitute unfair methods of competition in commerce 
which are declared to be unlawful by section 5 of the said Federal 
Trade Commission act. 

Petitioner, therefore, respectfully asks that by reason of the fore- 
going facts, disclosing acts and conditions set forth in this applica- 
tion of unlaAvful discriminations in price and of unfair methods of 
competition in commerce, this Commission investigates the matter 
complained of and if, upon such investigation, the Commission has 
reason to believe that there is a violation of law over which the Com- 
mission has jurisdiction that a complaint be issued against the re- 
spondents and such further proceedings be had as the law requires 
or contemplates and to the Commission shall seem meet. 
Respectfully submitted. 

Western Association of Eolled Steel Consumers, 
By James E. MacMurray, President. 
W. E. McCoLLUM, Secretary. 
Miller, Starr, Brown, Packard & Peckham, 

Attorneys for Petitioner. 
John S. Miller, 

Of Counsel, Room 1622, 68 West Monroe Street, Chicago, III, 



13 

[In the matter of the application of the Western Association of Rolled Steel Consumers for 
a complaint against the United States Steel Corporation and others.] 

Before the Federal Trade Commission. 



STEEL CONSUMERS. 

I. 

We submit the application filed by this association with the Com- 
mission on August 1, 1919, and the statements therein contained, 
and make the same a part of this statement, as therein set forth. 

II. 

1. As is alleged in our application, the respective respondents, 
upon sales in interstate commerce of rolled steel products produced 
by them, respectively, to members of the petitioner association, have 
discriminated and are discriminating in price between different pur- 
chasers of such commodities, which commodities have been and are 
being sold by said respondents upon such sales, for use, consumption, 
or resale within the United States, and where the effect of such 
discrimination may be, has been, and is to substantially lessen com- 
petition in that line of commerce and where such discrimination in 
price was not and is not on account of differences in the grade, qual- 
ity, or quantity of the commodity sold, and where such discrimina- 
tion did not make only due allowance for differences in the cost of 
selling or transportation, and where such discrimin'ation in price was 
not made in good faith to meet competition. 

(a) That by way of such discrimination in price said United 
States Steel Corporation, through and by its subsidiary, the Car- 
negie Steel Co., and other [of] its subsidiaries producing rolled steel 
products in the Pittsburgh district, or in the district east of Gary, 
or by its selling agency or agents, has repeatedly and at divers and 
all times during the six months and upward last past, sold and is 
selling such rolled steel products produced by it, including steel 
plates, shapes, sheets and bars, and other products of their rolling 
mills, to divers purchasers of such commodities at Pittsburgh, Pa., 
and at divers other points between Pittsburgh and Gary, or in 
the territory tributary to Pittsburgh, at divers prices therefor, and 
at the same time and times has sold like commodities prodviced by 
it through its subsidiary, the Illinois Steel Co. at its mills at Gary, 
Ind. ; Chicago, 111.; Joliet, 111.; and in Wisconsin and Michigan to 
divers persons and corporations at Chicago and thereabouts and 
in the territory tributary thereto who are members of the petitioner 
association, and upon such sales exacted and charged prices for 



14 

suck commodities higher by a large sum, to wit, 27 cents per hun- 
dred pounds or thereabouts, all of which respective commodities 
were sold upon said respective sales for use, consumption, or resale 
within the United States ; and has thereby so, as aforesaid, discrimi- 
nated in price between different purchasers of commodities; and 
the effect of such discrimination has been and is to substantially 
lessen competition in that line of commerce, and that such discrimi- 
nation in price did not make only clue allowance for difference in 
cost of selling or transportation, and was not made in good faith to 
meet competition. 

(5) That said other respondents, by way of such discrimination 
in price respectively, have repeatedly and at divers and at all times 
during the six months and ui^ward last past sold and are selling 
their rolled steel products produced by them respectively to divers 
purchasers of such commodities at Piltsburgh, Pa., and at divers other 
points between Pittsburgh and Chicago and in the territory tributary 
to Pittsburgh, at divers prices therefor, and at the same time and 
times have sold their like commodities, produced by them respec- 
tively, at their respective mills at or near Chicago, 111., to divers 
persons and corporations, at Chicago and thereabouts, and in the 
territory tributarj^ thereto, who are members of the petitioner as- 
sociation, and upon such sale have exacted and charged and are 
exacting and charging prices for such commodities higher by a large 
siun, to wit, 27 cents per hundred pounds or thereabouts, all of which 
respective commodities were sold at said respective sales for use, 
consumption, or resale within the United States, and have respec- 
tively thereby, so, as aforesaid, discriminated in price between dif- 
ferent purchasers of commodities; and the effect of such discrim- 
ination has been and is to substantially lessen competition in that 
line of commerce, and that such discrimination in price did not 
make only due allowance for difference in cost of selling or trans- 
portation, and was not made in good faith to meet competition. 

(c) That said respective respondents during the period afore- 
said, in their sales of their respective rolled steel products to the 
members of the petitioner association, have charged and are charg- 
ing for such their rolled steel products produced at their respective 
mills at Gary, East Chicago, and Indiana Harbor, Ind. ; Chicago 
and Joliet, 111.; and Milwaukee, Wis., and delivered at or shipped 
from such respective mills to members of the petitioner association 
and have exacted and are exacting on sales to members of the pe- 
titioner association prices for such commodities which are in excess 
of the normal and proper prices measured by the cost of production 
with the addition of a reasonable profit, by, and by the inclusion 
in such price and the addition to such normal and proper price, 



15 

of the flat rate for the transportation of such commodities from 
Pittsburgh to the mill, shop, warehouse, or place of delivery to 
such purchasers, or such excessive sum or price including such 
freight rate, less the freight rate upon such commodities from Chi- 
cago, or the mills of such respective sellers, so that the net cost of 
[to] such purchasers of such commodities at their respective mills or 
places of delivery shall be tlie same as if such commodities were pro- 
duced at and shipped from Pittsburgh, Pa., or from the mills of said 
United States Steel Corporation or its subsidiary, the Carnegie Steel 
Co., at Pittsburgh. 

That said respective respondents have during the period aforesaid 
sold and are selling their rolled steel products to fabricators of steel 
located at points between Gary and Pittsburgh who are competitors 
of fabricators of steel located at Chicago, Milwaukee, Minneapolis, 
and other places in the Middle West and West at prices which 
include the freight rate on such commodities from Pittsburgh to 
the point or destination at which the shops, warehouses, or places 
of delivery of such purchasers are situated, such price including 
such freight rate covering the net cost to such purchasers at such 
place of destination, such sales being or including sales of such 
commodities produced by said respective respondents at and ship- 
ped from their respective mills of production at Gary, East Chicago, 
Indiana Harbor, Chicago, Joliet, Milwaukee, or other places in the 
Chicago district. 

III. 

That in the aforesaid conduct of its said trade and business of 
producing and selling rolled steel products by the United States Steel 
Corporation and its subsidiaries, operating rolling mills for the 
production thereof at Pittsburgh and at other points in the Pitts- 
burgh district, and at Youngstown, Ohio, and at other jDlaces east 
of Gary, and at Gary, Chicago, Joliet, and Milwaukee, the said 
United States Steel Corporation and its subsidiar^r in such sales 
hereinbefore mentioned, and by reason of such disci'imination in 
price, place the fabricators of steel in the Middle West and in the 
West and Northwest at a great disadvantage in their competition 
for the sale of their products with and against other fabricators 
of steel in said district east of Gary. That by reason of such dis- 
crimination in prices such fabricators of steel in the Chicago 
district and in the Middle West and West and Northwest in their 
competition for trade at points east of Gary, being, as aforesaid, 
compelled to pay to said respondents for their rolled steel products a 
price by which the cost to them of such rolled steel products at 
their shops or places of fabrication, are as much as if they had 
bought such rolled steel products at Pittsburgh and paid the freight 



16 

thereon from Pittsburgh to their own shops, and being also com- 
pelled to pay or bear the freight rate upon their own fabricated 
commodities to the destination or location of their purchasers, are 
made unable to compete with their competitor fabricators at Pitts- 
burgh and in the East; and that the effect of such discrimination 
has been and is to substantially lessen competition in that line of 
commerce. 

IV. 

That such discrimination in price of rolled steel products produced 
by said United States Steel Corporation and its subsidiaries has 
been, during the period aforesaid, made and is being made between 
different purchasers of commodities upon sales in which such com- 
modities are sold and purchased for resale within the United States ; 
that many such purchasers, who are members of the petitioner asso- 
ciation, are dealers- in such commodities, and purchased the same 
from the respondents for resale within the United States; and that 
the effect of such discrimination has been and is to substantially 
lessen competition in that line of commerce betAveen such dealers 
and purchasers who are located at Chicago and other places near 
or tributary thereto or in the Middle West, West, and Northwest 
with their competitors who are situated in the territory east of 

Gary. 

V. 

That by reason of such discrimination the Chicago fabricators 
and dealers in rolled steel products are put at a disadvantage as 
compared with the fabricators and dealers at Pittsburgh and in the 
Pittsburgh district in the competition for trade. For illustration, 
at each of the following cities of Illinois to the following amounts : 

Amounts 

per cwt. 

(cents). 

Streator and Peoria 7 

Bloomington, Fulton, Galesburg, and Quincy 6 

Springfield, East St. Louis, Centralia 5 

Cairo and Johnston City 12 

As to the district east of Chicago and between Chicago and Pitts- 
burgh: The Wisconsin Bridge & Ii-on Co., located at Milwaukee, 
Wis., 85 miles north of Chicago, and where the United States Steel 
"Corporation has a rolling mill, is a fabricator of steel and a member 
of petitioner association and is a competitor of a Detroit fabricator. 
By reason of such discrimination the Wisconsin company, although 
located in such close proximity to the I'espondents' rolling mills, and 
a purchaser of steel produced at such mills, is put at a disadvantage 
over its Detyoit competitor in business at Detroit of $5 to $6 per ton ; 



17 

and this is true with reference to the competitors of the Wisconsin 
company in Indiana, Illinois, and elsewhere. 

The Kewanee Boiler Co., located at Kewanee, 111., by reason of 
such discrimination, is not onlj'^ put at such a disach-antage over its 
competitors in the Pittsburgh district in the competition for trade at 
points east of Indiana as to substantially put it out of the competi- 
tion, but at points in the southwest, sucli as Tulsa, Okla., and Dallas, 
Tex., the manufacturer in the Pittsburgh district, although several | 
hiindred miles more distant, can make delivery in Tulsa, Okla., or I 
Dallas, Tex., within a cent per pound of what it costs tlie Kewanee I 
compahy. 

McCord & Co., steel founders at Chicago and a member of the 
petitioner association, has a Pittsburgh competitor, and both have 
as customers for the trade with which thoy are competing at various 
points in Pennsylvania and in the East. 

By reason of which discrimination McCord & Co., although it 
gets its steel from the Chicago mills, is compelled to face a handicap 
of substantially $10.80 per ton, represented by the freight rate from 
Pittsburgh to Chicago which is not earned, plus the freight upon 
its own product from Chicago to Pittsburgh, which is earned. Such 
freight from Pittsburgh to Chicago which is not earned is arbitrary 
and forms no part of the proper price for the steel. On the other 
hand, the Pittsburgh competitor can compete with the McCord Co. 
for business in Chicago and the West without any such handicap 
and as if its factory or mill were at Chicago where the McCord mill 
is, because the Pittsburgh competitor, in competing for business at 
Chicago or in the Chicago district, purchases his steel at Pittsburgh 
without having to pay such unearned freight, and this handicap on 
the McCord Co. enables the Pittsburgh competitor to compete on 
an even keel in Chicago with McCord. 

The Even L. Eeed Manufacturing Co., and a member of the 
petitioner association, is a manufacturer of bolts and rivets at Ster- 
ling, 111., ajid by reason of such discrimination is compelled to pay 
for their rolled steel products at Chicago such price increased, as 
aforesaid, by the amount of the freight rate fi'om Pittsburgh to 
Chicago as if they bought their steel at Pittsburgh. A competitor 
bolt and rivet concern in Ohio, more than 300 miles from the Chicago 
district in which the Eeed Co. is situated and trades, can by reason 
of such discrimination manufacture and deliver in the Chicago dis- 
trict its product at less than the Eeed Co. can from its factory. 

The Western Wheeled Scraper Co. and a member of the petitioner 

association, manufacturers in Chicago a dump car which it sells in 

competition with competitors in the Pittsburgh district. The steel 

in each car costs the Western Co. $54 more than it costs its Pitts- 

139378—19 ^2 _ * 



18 

burgh competitoi". The Pittsburgh competitor can ship its product — 
its own cars — on their own wheels to Chicago at mileage rates 
amounting to $32.69, and can therefore deliver its product in Chicago 
$21.31 per car cheaper than can tlv> Western Co., although the West- 
ern Co. buys its steel at Chicago. On the other hand, the Western 
Co., in order to compete in the Pittsburgh district, is put to the cost, 
amounting to $86.69 more than the Pittsburgh company. 
^-wlcacyo The respondent, Inland Steel Co., a quoted to H. C. Christman, of 

Detroit, a price for rolled steel of $2.68 per hundredweight f. o. b. 
Detroit, which is 260 miles from the seller's mill. At the same time 
the}' charged and exacted a price f. o. b. Chicago of $2.72 pdr hun- 
dredweight. 

What is above alleged as specific, concrete illustrations applies 
mutatis mutandis to the purchases of rolled sheet products and the 
trade and business of all the members of the applicant association 
as against and in favor of their competitors in the Pittsburgh or 
eastern district. Like and divers other and different discrimina- 
tions have been and are being made by respondents in sales to the 
members of applicant association. 

By reason of which arbitrary increase of price b}- adding to the 
fair niarket price of rolled steel purchased by the members of the 
applicant association the freight rate from Pittsburgh, or by mak- 
ing their sales on the f. o. b. Pittsburgh basis of steel manufactured 
at Garj^, Chicago, or in that district, such members are unable to 
sell their product manufactured from such rolled steel in competi- 
tion with Pittsburgh competitors or competitors in the Pittsburgh 
or eastern district in the territory east of Gary, Ind., although they 
have had and rightfully should be permitted to have, and but for 
such discrimination in price could continue to have, a large and 
profitable trade therein. And while by such practice and discrimi- 
nation in j)rice such members of applicant association are excluded 
from the district east of Chicago and confined to their own district, 
their eastern competitors, who are so thereby given their eastern 
territory exclusively, are also placed upon an equal basis with such 
I'l members of applicant in the competition for trade in their own 
Chicago or Middle West district. 

VI. 

Prior to the formation of the United States Steel Corporation 
and its absorption of the various competing producers of rolled 
steel, there was no practice of using Pittsburgh as a basing point on 
all iron and steel shipments, such as is now in existence and herein 
complained of by the applicant association. 

To whatever extent such Pittsburgh basis or Pittsburgh as a 
basing point for iron and steel was followed in the trade, prior to 



19 

the formation of the United States Steel Corporation, it prevailed 
during the time and grew out of the fact that Pittsburgh was the 
principal manufacturing point for iron and steel in and near which, 
and in that district substantially all the rolled iron and steel was 
produced, which is no longer the case or fact. 

PirrSBURGH BASIS SEVER ADHERED TO PRIOR TO THE FORMATION OF UNITED 

STATES STEEL CORPORATION. 

That such Pittsburgh base was not during that time adhered to, 
but manufacturers of rolled steel at divers places in the Pittsburgh 
district or tributary thereto, such as Buffalo, Phoenixville, Beth- 
lehem, and Wheeling, and along the Ohio River in Ohio and 
Kentuclfy and other places, never observed the Pittsburgh base, but 
by the absorption of the freight rate or otherwise made the price 
to their customers so as to put those customers on as good a basis 
as competitors who were near Pittsburgh or as their own proximity 
to the consuming trade justified. 

That during such time manufacturers at Pittsburgh and in the 
Pittsburgh district who used the Pittsburgh base customarily, if 
such base were named, absorbed the freight to the purchaser's des- 
tination, or some portion thereof, as they might determine in getting 
the order and fixing the price. 

That such practice of using the Pittsburgh base during such time 
did not apply to or include rolled steel manufacturers outside of such 
Pittsburgh district, or not near or tributary thereto. For instance, 
the rolled steel produced at Birmingham, Ala., was sold f. o. b. Bir- 
mingham ; the rolled steel produced by the Colorado Fuel & Iron Co. 
was sold f. o. b. Pueblo, Colo., where its plants were; producers of 
rolled steel in or about Chicago and the Middle West sold to con- 
sumers at Chicago and in that district f. o. b. Chicago, or the pur- 
chaser's destination. 

Manufacturers of rolled steel in the Pittsburgh district — for in- 
stance, Jones & Laughlin, who are lai'ge producers of structural steel 
and steel used by fabricators — customaril}- sold their roll#d-steel 
products to customers in or about Chicago, or in that district, f. o. b. 
Chicago, and themselves absorbed the freight rate from Pittsburgh 
or their mills to Chicago. 

VII. 

As illustrations of the allegations of VI of this statement, the 
applicant association shows that the Jones & Laughlin Steel Co. in 
the fall of 1898 sold rolled steel products consisting of angles and 
bars to the Kenwood Bridge Co., located at Grand Crossing, in the 



20 

city of Chicago, at a net price less the freight of 15 cents per 100 
pounds, which was absorbed by the seller. 

The Cleveland Eolling Mill Co., of Cleveland, Ohio, in the fall 
of 1898, sold products of their rolling mill, consisting of angles, to 
the Kenwood Bridge Co., aforesaid, at a net price delivered Chicago, 
the seller absorbing and paying the fi'eight of 12 cents per 100 
pounds. 

In the years 1897-98, the Struthers Iron & Steel Co., of Struthers, 
Ohio, sold to the Sykes Co., a fabricator in Chicago, its rolled steel 
product at net prices, the seller absorbing and paying the actual 
freight (or in some cases an amount as freight larger than the actual 
freight, amoiinting to a further reduction in the net price). 

The New Philadelphia Iron & Steel Co., of New, Philadelphia, 
Ohio, in 1898 sold its rolled steel products to the Sykes Co. afore- 
said at net prices, the seller absorbing and paying the entire freight 
(or in some cases absorbing and pajang a part of the freight). 

In 1898-99 the Cambridge Iron & Steel Co., of Cambridge, Ohio, 
&old to the Sykes Co. aforesaid, its rolled steel products at mill price, 
less freight to Chicago, or less a large part of such freight. 

From about November 2, 1898, to August 7, 1899, the Corning Steel 
Co., of Hammond, near Chicago, sold its product to the Sykes Co., 
f . o. b. Chicago, there being 57 such sales. After August 7, 1899, dur- 
ing that year it sold f. o. b. mill, there being 39 orders or there- 
abouts. 

In 1898 the Atlanta Steel & Tin Plate Co., of Atlanta, Ind., sold its 
rolled steel products to the Sykes Co., at mill price, less freight to 
Chicago. 

In 1898 the Union Steel Co., of St. Louis, Mo., sold to the Sykes 
Co. one order f. o. b. mill, and other orders at mill prices less 
freight to Chicago, the seller absorbing the freight. 

In No'^ember and December, 1902, the Youngstown Iron Sheet & 
Tube Co., of Youngstown, Ohio, sold to Sykes Co. its rolled steel 
l^roducts at mill price, less freight to Chicago. In October and 
December, 1903, it sold the Sykes Co. f. o. b. Youngstown. 

The American Sheet Steel Co. (which became a subsidiary of 
the United States Steel Corporation after it absorbed the plant 
of the Corning Co., at Plammond, Ind.) sold to the Sykes Co. in 
August, 1900, f. o. b. Hammond; and later they sold to the Sykes 
Co. such products from its Vandergrift-Apollo plant at Vander- 
gi'ift, Pa., and fi-om its xVetna-Standard plant, at mill price, less 
freight, Pittsburgh to Chicago ; and, in the latter part of that year, 
sold from its plants at Canton and Cambridge, Ohio, Muncie, Ind., 
and Vandergrift, Pa., at prices including the freight from Pitts- 
burgh to Chicago, less the freight from mill to Chicago. 



21 

In other sales said Sheet Steel Co. sold the same customer from 
mills in Ohio at a price which included the freight from Pittsburgh 
to Chicago diminished by the freight from the mill to Chicago. 

In a sale from its mill at Scottdale, Ohio, the price was f. o. b. 
mill. In shipments from its mill at Canonsburg, Pa., it sold at 
prices including the freight to Chicago. In 1901 said Sheet Steel Co. 
sold said Sykes Co. from its Cambridge plant at a price, less freight 
to Chicago, of 15 cents per 100 pounds. In divers cases from its 
plant at Cambridge and other plants, it sold said Sykes Co., in- 
cluding in the price the freight from Pittsburgh to Chicago, where 
the actual freight on the shipment from place of shipment was 
materiall}' less than the freight from Pittsburgh. 

Other sales were made by said American Sheet Steel to said Sykes 
Co. on like or other diverse and different bases during said year 1901 
and until early in the year 1902. 

That the supposed Pittsburgh base had no basis or reason for its 
existence in the trade, nor stability or uniformity in its application, 
except to and among the producers of iron and steel in and about 
Pittsburgh and to the trade and business of the mills there, which 
were all located in substantially the same or like proximity to or 
distance from consumers, and when the freight rate from mill to con- 
sumer was substantially or approximately the same. That the adop- 1 
tion and application of such basis could only be successful when put | 
into effect by agreement of the different producers, which would be I 
or result in the lessening of competition among such producers and I 
which is in restraint of trade. That such an arrangement and prac- 
tice by agreement or concert of the producers, and its consequent 
restraint of trade, could be reasonable and lawful, if at all, only 
where the competing trade is in a single place or district, and does 
not include producers widely separated, as are producers at Pitts- 
burgh, and in the East, and Chicago and the Middle West, and where 
the districts of large consumption and demand are also wiclelj'^ sep- 
arated, and one of such districts is near or tributary to the rolling- 
mills and supply of one set of producers, and another district of con- 
sumption and demand is in proximity or tributary to another and 
different place of production, as is the case with the Pittsburgh dis- 
trict and the Chicago and Middle West district. 

Even prior to the formation of the United States Steel, and of the 
other large combinations which were theretofore formed and ab- 
sorbed by it, and while Pittsburgh and the Pittsburgh district con- 
tained by far the principal production of rolled-steel iDroducts, and 
production outside of that district was verj'^ small by comparison, 
the Pittsburgh base was not adhered to, at least by mills as far from 
Pittsburgh as Buffalo, and could not be adhered to under strictly I 
competitive conditions or without some agreement or concert. In * 



22 

fact, it was not adhered to "vvitli whatever agreement or concert there 
was or was attempted. 

Much less at the present time, when there has grown up the very 
large production of rolled steel and iron in Chicago and the Chicago 
district, at as low or lower cost than in the Pittsburgh district, and 
there is also a large and rapidly growing demand and consumption 
which is contiguous or near or tributary to said middle western roll- 
ing mills, can such Pittsburgh base be adhered to under competitive 
conditions or without the strong arm of combination. 

VIII. 

PRODUCTION AND CONSTTMPTION IN THE CHICAGO DISTRICT AND IN THE 

MIDDLE WEST AND WEST, 

As stated in our application, the United States Steel in 1906 and 
since has constructed its immense plant at Gary, and its Illinois steel 
plant at Chicago has been very much enlarged, and the other large 
plants of the Inland Steel Co., the Interstate Iron & Steel Co., and 
the Steel & Tube Co. of America have been constructed. These 
plants were constructed at and near Chicago because of the need 
and demand for them for the then great and growing consumption 
of the Middle West and western territory. They ^yere built with the 
view of supplying that great and growing demand. There, in the 
Middle West, in which these plants were established, was a great 
market which is growing rapidly with the growth of the Middle 
West and West and much more rapidly that the eastern territory. 
These mills in the Chicago district are advantageously situated for 
producing rolled steel at a minimum cost. All this was expressed 
by Judge Gary, chairman of the United States Steel Corporation, in 
a speech before the chamber of commerce of the city of Dulutli in 
June, 1918, in which he said : 

Why did the Steel Corporation build a plant on a sandy desert along the 
southern shores of Lake Michigan? Because of a love for Indiana? Oh, no; 
none of us have any particular interest in that State. It was purely a business 
proposition. We would much rather have spent the money expended in Gary 
right here in Duluth. Our friends are here. But the proposition would have 
been a failure from a business point of view. There fuel was easily obtainable, 
as were other things which are necessary to the making of steel. There was a 
market. For the manufacture of pig iron Duluth is well situated, perhaps 
nearly as well as almost any other city. But Birmingham can manufacture 
pig iron $3.05 more cheaply per ton than can Duluth. As to steel products, 
Duluth is behind Gary by 38 per cent, Pittsburgh by 13 per cent. 

Steel costing $100 per unit to produce in Gary would cost $122.10 
ill Pittsburgh. 

Chicago and the Chicago district are favorably situated with re- 
spect to transportation of material to the mills and of the product of 



the mills to the consumers. The entire situation and all the circum- 
stances favor the purchase and consumption of steel products and 
everj'thing in which steel is used at the lowest cost. It is obvious, we 
submit, that the fabricators of steel in the Middle West and West 
tributary to Chicago, and their customers and the consuming public 
of everything into which the products of steel enter as a component, 
are entitled to the advantage their situation gives them, which is the 
benefit of a price as low as if they lived at Pittsburgh, or in the 
Pittsburgh district, or as near to Pittsburgh as they are to Chicago. 
Of course, the applicant association will have the opportunity of 
making any further reply to whatever showing or statement may b^ 
made in opposition to their application. 
Eespectfully submitted. 

The Western Association of Kolled Steel CoNstnviERS, 
By Miller, Starr, Brown, Packard & Packard, 

Their Attorney s.^ 
Room 1522 First National Bank Building^ CMcago^ 111. 
To John S. Miller, of Counsel. 



APPLICATION OF THE SUPERIOR COMMERCIAL CLUB. 



[Petition for issuance of complaint.] 
TO THE FEDERAL TRADE COMMISSION. 

The petition of the above-named applicant respectfully shows: 

1. That the above-named applicant, The Superior Commercial 
Club, is a corporation organized and existing under and by virtue 
of the laws of the State of Wisconsin for the purposes, among 
others, of fostering just and equitable principles of trade, correcting 
abuses, and promoting commercial and manufacturing interests in 
the city of Superior, Wis. 

2. That this application is made in behalf of the commercial, 
trade, and financial interests of the citizens of the city of Superior, 
Wis., the citizens of every other city and community of the United 
States similarly situated with respect to the trade practice herein- 
after referred to, and the interest of manufacturers, steel fabricators, 
and others in such cities whose rights to free and unrestricted com- 
petition under a natural and normal economic order are invaded 
by such trade practice. 

3. That the United States Steel Corporation, a corporation organ- 
ized and existing under and by virtue of the laws of the State of 
New Jersey, together with a large number of steel-manufacturing 
companies whose names are unlaiown to this applicant, have engaged 
in unlawful practices in a manner whereof the Fede;i'al Trade Com- 
mission has jurisdiction, to wit, have engaged in and practiced 
unfair methods of competition in commerce contraiy to section 5 
of the " trade law," being an act of Congress entitled "An act to 
create a Federal Trade Commission, to define its powers and duties, 
and for other purposes," appi'oved September 26, 1914 (38 U. S. 
Stat, at L., ch. 311, p. Tl7) , in the particulars hereinafter enumerated. 

4. That for a number of years last past the United States Steel 
Corporation, either by the exercise by it of a monopolistic control of 
the steel industry or by united action and agreement with the un- 
known steel-manufacturing companies above referred to, commonly 
designated as independent steel companies, has fixed and controlled 
the market price of steel throughout the States and Territories of 
the United States of America ; that such price has been fixed, during 
the period above referred to, upon what is known and commonly 
designated as " the Pittsburgh base " ; that the purchasers of steel 
throughout the States and Territories of the United States are, by 

(24) 



25 

reason of the fact above set forth, obliged to pay for steel purchased 
by them the market price at Pittsburgh, Pa., plus the current freight 
charge from Pittsburgh to the point of delivery, irrespective of the 
actual shipping point of the goods purchased; for example, a pur- 
chaser of steel at Superior, Wis., is obliged to pay for steel shipped 
and delivered from Chicago, 111., or Gary [Ind.], in Duluth, Minn., 
the market price at Pittsburgh plus the current freight rate from 
Pittsbui'gh to Superior, notwithstanding the fact that the steel so 
purchased by him is in fact shipped from Chicago, 111., or Gary 
[Ind.], in Duluth, Minn., and the actual cost of shipment from the 
points last named is considerably less than the cost of shipment or 
freight charged from Pittsburgh. 

5. That by reason and because of the fixing of the price as above 
indicated it is impossible for the purchaser of steel at any point in 
the United States to purchase steel from any steel mill or producer 
upon any other basis than that above set forth, and the element of 
price competition is absolutely excluded from the steel trade. 

6. That competition on the basis of natural and normal economic 
principles and conditions is the policy of the law throughout the 
United States of America, enacted into the Federal Statutes and 
supported by the decisions of the courts, but that the fixing of the 
steel price upon the Pittsburgh plus base hereinabove set forth by the 
United States Steel Corporation directlj^, or by the United States 
Steel Corporation in conjunction with the Independent Steel Com- 
panies above referred to, and the effectiveness and unfairness thereof 
as a general and inexorable trade practice and condition, results in 
an arbitrary, unnatural, and abnormal economic condition, making 
it impossible for manufacturing companies and steel fabricators 
throughout the United States and outside of the Pittsburgh base 
district to compete with the United States Steel Corporation, or with 
said Independent Steel Companies in lines of manufacturing in which 
the said United States Steel Corporation and the said Independent 
Steel Companies are likewise engaged ; that the establishment and en- 
forcement of the said Pittsburgh plus steel price as the market price 
of steel prevents and prohibits competition between individuals or 
individual companies engaged in manufacturing and steel fabricating 
and prevents the establishment and development of new manufac- 
turers and new steel fabricating plants upon normal and natural 
economic lines to the incalcuable damage and detriment of persons 
engaged in manufacturing and steel fabricating and the general pub- 
lic and abnormally increases the price of steel and steel products. 

7. That the establishment of the Pittsburgh plus basic price of 
sleel hereinabove set fortli, by reason of the facts above set forth, con- 
stitutes an imfair method of competition in commerce, creates an 



26 

arbitrary, unnatural, and abnormal economic condition destructive 
of the competitive system in commerce, and operates to prejudice not 
only the rights of those personally engaged in manufacturing and 
steel fabricating, but likewise the interests of the general public. 
That the above-named applicant further shows : 

1. That the United States Steel Corporation, a corporation organ- 
ized and existing under and by virtue of the laws of the State of 
New Jersey, together with a large number of steel manufacturing 
companies whose names are unknown to this applicant, have engaged 
in unlawful practices in a manner whereof the Federal Trade Com- 
mission has jurisdiction, to wit: 

2. Have directly and indirectly discriminated and still continue 
to directly and indirectly discriminate in price between different pur- 
chasers of commodities, which commodities have been sold and are 
being sold for use, consumption, or resale within the United States 
and the Territories thereof, the effect of which discrimination has 
been and is to substantiallj'^ lessen competition and tend to create a 
monopoly in a line of commerce; that such discrimination in price 
was not and is not made on account of differences in the grade, 
quality, or quantity of the commodity sold, or to make only due 
allowance in the cost of selling or transportation, nor in good faith 
to meet competition, nor for the purpose of selecting customers in 
bona fide transactions; and that such price discrimination was and is 
contrary to the provisions of section 2 of the Cla5i;on law, being an 
act of Congress entitled "An act to supplement existing laws against 
unlawful monopolies, and for other purposes," approved October 15, 
1914 (38 U. S. Stat, at L., chap. 323, p. 730). 

3. That for a number of years last past the United States Steel 
Corporation, either by the exercise by it of a monopolistic control of 
the steel industry or by united action and agreement with the unknown 
steel manufacturing companies above referred to, commonly desig- 
nated as Independent Steel Companies, has fixed and controlled the 
market price of steel throughout the States and Territories of the 
United States of America ; that such price has been fixed, during the 
period above referred to, upon Avhat is known and commonly desig- 
nated as " The Pittsburgh Base " ; that the purchasers of steel through- 
out the States and Territories of the United States are by reason and 
because of the fact above set forth obliged to pay for steel purchased 
by them the market price at Pittsburgh, Pa., plus the current freight 
charge from Pittsburgh to the point of delivery, irrespective of the 
actual shipping point of the goods purchased ; for example, a pur- 
chaser of steel at Superior, Wis., is obliged to pay for steel shipped 
and delivered from Chicago, 111., or Gary [Ind.], in Duluth, Minn., 
the market price at Pittsbui'gh plus the current freight rate from 



• - ' 27 

Pittsburgh to Superior, notwithstanding the fact that the steel so 
purchased by him is in fact shipped from Chicago, 111., or Gary 
[Ind.], in Duluth, Minn., and the actual cost of shipment from the 
points last named is considerably less than the cost of shipment or 
freight charged from Pittsburgh. 

4. That the basic price above referred to constitutes and results in 
a discrimination in the price of steel between different purchasers not 
within any of the exceptions of the act above referred to, and is a price 
based upon arbitrary, unnatural, and abnormal conditions, and that 
the purchaser receives no value whatever for the arbitrary and excess 
" freight rate " paid by him; for example, a purchaser of steel at Chi- 
cago receives a shipment of goods from mills in the Chicago district 
upon which he is obliged to pay and does pay, in addition to the mar- 
ket price, the freight rate from Pittsburgh to Chicago, which pre- 
vents him from competing with a purchaser engaged in a like trade at 
Pittsburgh who may buy from a Pittsburgh mill Avithout the freight 
rate added, and this notwithstanding the fact that no freight is actu- 
ally paid uj)on the commodity; that this results in a discrimination 
in price as between the Pittsburgh purchaser and the Chicago pur- 
chaser; that the same condition exists in all cities and communities 
outside of the Pittsburgh district ; and that all purchasers of steel out- 
side of such district are discriminated against to the extent of the rela- 
tion of the freight rate from the nearest point of shipment to the 
point of delivery to the arbitrary freight rate from Pittsburgh which 
he is obliged to pay. 

5. That the effect of the discrimination in price hereinabove set 
forth is to substantially lessen competition between manufacturers 
and steel fabricators generally; that it arbitrarily, unnaturally, and 
abnormally prevents manufacturers ^nd steel fabricators located 
near steel mills and factories outside of the Pittsburgh district from 
competing with manufacturers and steel fabricators no more favor- 
ably located with respect to the source of supply physically but within 
the so-called Pittsburgh district. 

6. That the price discrimination hereinabove described tends to 
create a monopoly in the manufacture of steel in that the discrimina- 
tion in price operates in favor of manufacturing plants and steel- 
fabricating industries owned or controlled by the United States Steel 
Corporation, or by other manufacturers and steel fabricators united 
with or controlled by it, and excludes the competition of private indi- 
viduals or corporations located in various places throughout the 
United States and obliged to pay the excess freight charged, as a cost 
of their production, for which no value is given or received. 

7. That the price discrimination hereinabove set forth not only 
directly discriminates against manufacturers and steel fabricators, as 



28 

above referred to, and tends to create a monopoly in the manufacture 
of steel, but also materially increases the price of steel products to 
the public and prevents manufacturing and steel fabricating along 
normal and natural lines to the detriment of the public at large and 
to the detriment of cities and communities otherwise favorably lo- 
cated for the develojDment of manufacturing and fabricating plants. 

"Wherefore, the petitioner prays that the defendant. United States 
Steel Corporation, together with such Independent Steel Companies 
as your Commission may upon investigation be able to identify as 
parties to the above offenses, may be served with a complaint or 
complaints and may be required to answer the charges herein, and 
that after due hearing and investigation an order may be made com- 
manding the defendants to cease and desist from said violations of 
the laws w^ithin the jurisdiction of this Commission, and for such 
other and further order as the Commission may deem necessary in the 
premises. 

Pickering & Eieser, 
Attorneys for The Suferior Commercial Cluh. 

E. I. Tipton, 

Corporation Counsel, of the City of Suj^erior, Wis., 
of Counsel. 



August 22, 1919. 

In the matter of tlie application of the Superior Commercial 
Club to the Federal Trade Commission for action abolishing the 
practice known as " Pittsburgh plus," and the establishment of an 
f . o. b. mill price for steel, the following suggestions are respectfully 
submitted : 

The present practice of the United States Steel Co. and of other 
corporations engaged in the manufacture of steel is as follows: 

The price of the steel is fixed at Pittsburgh and the Pittsburgh 
price is charged the purchaser of the steel, no matter where he is 
located, plus the cost of transporting the steel from Pittsburgh to 
the point where the steel is to be used. This additional charge is made 
not only when the steel is actually sMpped from Pittsbui-gh, but 
also when the steel is not shipped from Pittsburgh. If the steel 
w^ere all shipped from Pittsburgh, there would be no objection to the 
practice, but when the steel is not shipped from Pittsburgh the addi- 
tional charge for transportation is a mere arbitrary and artificial 
increase of price, which clearly constitutes an uni-easonable practice 
in restraint of trade. This opinion is confirmed by the United States 
Government, which has refused in certain cases to sanction the addi- 
tional charge in the case of its own purchases. For example, Avhen 
steel is manufactured in Duluth it is clearly unfair to burden the 



29 

purchaser with the transportation charge from Pittsburgh to Duluth 
or Superior, which at the present time happens to be $9.90 a ton. 
This $9.90 a ton is justifiable as an actual charge for service rendered 
when the service is rendered. The service in this case is the trans- 
portation of the steel from Pittsburgh to the point of destination. 
When no such sei'vice is rendered, as in the case of steel actually 
manufactured at Duluth, and not transported from Pittsburgh to 
Superior or Duluth, the adding of the charge for the fictitious serv- 
ice is clearlj^ unjust and unreasonable and is in direct violation of 
the statutes of the United States. 

This practice is an unjust discrimination against the communi- 
ties located in the Lake Superior district. The Lake Superior dis- 
trict has the richest and best fields of iron ore in the world. It has 
unrivaled transportation facilities, both by water and by rail. Natur- 
ally there should develop in this district marvelous industrial activ- 
ity, especially in the fabrication of steel and iron products, but 
fabricating plants are not being located. When we inquire the 
reason, we find it to be the unjust practice involved in making the 
Pittsburgh district the sole basing point for steel prices. If this 
were done away with, it is believed that a fair share of fabricators 
would avail themselves of the various advantages offered at the head 
of Lake Superior and would locate here. jSTow, it is not the 
thought of the Superior Commercial Club that the United States 
Government should extend it any special aid or artificial assistance 
in the development of the citj' of Superior and the surrounding dis- 
trict. The people of Superior are willing to stand on their own 
feet and take their OAvn chances. All they ask of the United States 
Government is that the present artificial handicap to which the head 
of the lakes is at the present time illegally subjected shall be re- 
moved. 

In answer to this argument. Judge Gary, the chairman of the board 
of directors of the United States Steel Corporation, takes the posi- 
tion that the abolition of the Pittsburgh base is not feasible. He 
further contends that the establishment of a mill base is out of the 
question. To be more specific, in discussing the question of the estab- 
lishment of a base for the plant located in Duluth, Minn., which is 
the feature of the whole case that is of vital interest to the Superior 
Commercial Club, Judge Gary intimated in his speech made in 
Duluth in the siunmer of 1918 that it costs 13 per cent more to manu- 
facture steel in Duluth than in Pittsburgh. This, he intimated, made 
it impossible to establish a base at Duluth. The inference was that 
the Steel Corporation could not manufacture steel profitably in Du- 
luth with a Duluth base. However, no proof of this was offered. The 
Superior Commercial Club certainly does not admit that it costs 13 
per cent more to manufacture steel in Duluth than it does to manu- 



30 

f acture it in Pittsburgh, but, for the sake of argument, we may tem- 
porarily assume that it does. In that case it seems clear to us that 
the logical thing to do would be to charge for the steel manufactured 
at Duluth such a price as would cover the cost of manufacturing, 
plus a reasonable, and indeed a liberal, profit. Then if the steel were 
shipped away from Duluth the actual cost of transporting it should 
be added. But we can never admit that such transportation cost 
should be added when no service of transportation is actually ren- 
dered. 

Now, suppose we accept Judge Gary's own intimation in regard to 
cost of manufacture, what do we find ? We find that in normal times 
the cost of manufacturing rolled steel does not exceed $20 a ton. 
Now, 13 per cent of $20 is $2.60. Thus it would seem fair, accord- 
ing to Judge Gary's own argument, that the people of the Duluth 
district should pay $2.60 a ton more for their steel than the people 
of the Pittsburgh district. But we find, as a matter of fact, that the 
steel corporation is charging the people of the Duluth district $9.90 
a ton more than it is charging the people of the Pittsburgh district. 
According to Judge Gary's own argument, therefore, the people of 
the Duluth district are being overcharged to the extent of $6.30 a ton 
at the present time. 

But let us analyze Judge Gary's argument further. He says the 
cost of manufacturing steel in Duluth is 13 i^er cent greater than in 
Pittsburgh, 38 per cent greater than in Gary, Ind., and 39 per cent 
greater than in Bii-mingham, Ala. He further states that a Duluth 
base can not be established because the cost of manufacturing in 
Duluth is 13 per cent greater than in Pittsburgh. It will readily be 
seen that the judge proves too much, and that his argument defeats 
itself. According to his own statement, the cost of manufacturing 
in Pittsburgh is about 25 per cent greater than in Birmingham or 
Gary. Now, if a difference of 25 per cent does not interfere with 
the establishment of a Pittsburgh base, how can a diti'erence of 13 
per cent between Pittsburgh and Duluth, which is only half as great 
as the difference between Birmingham and Pittsburgh, prevent the 
establishment of a Duluth base? 

But while the people who listened to Judge Gary in Duluth under- 
stood him to say that the cost of manufacturing in Duluth is 13 
per cent greater than in Pittsburgh, the printed pamphlet which he 
later issued containing his Duluth address indicates that his Duluth 
hearers did not exactly understand his statement in regard to the 
relative cost of manufacture in Pittsburgh and Duluth. The printed 
report of the speech issued by the judge himself states that the 
Duluth plant is more up to date and better equipped than the Pitts- 
burgh plants, and therefore more efficient than the Pittsburgh plants. 
In fact, in the Duluth address Judge Gary stated that the Duluth 
location was not only the most beautiful but also the most practical 



31 

site for a steel plant of any in the world. Then Judge Gary stated 
that it would cost 13 per cent more to manufacture in Duluth than 
in Pittsburgh with plants of equal efficiency. Wliat the actual dif- 
ference in cost of manufacturing may be between Duluth and Pitts- 
burgh, the printed report of Judge Gary's address leaves us to con- 
jecture, and it is the opinion of the Superior Commercial Club that 
^the cost of manufacturing steel in Duluth should be less than it is 
in Pittsburgh. The reasons for this opinion may be stated briefly as 
follows : 

To manufacture a ton of the ordinary rolled steel required 2 tons of 
50 per cent iron ore and IJ tons of coal. In ordinary times the cost 
of transporting the iron ore from Duluth or Superior to the Lake 
Erie ports is approximately 60 cents a ton. On the other hand, the 
cost of transporting a ton of coal from the Lake Erie ports to Duluth 
is in ordinary times approximately 30 cents a ton. It must be borne 
in mind that the ore for the Pittsburgh mills has to be transported 
from Duluth or Superior to the Lake Erie ports, while the coal used 
in smelting at Duluth has to be transported from the Lake Erie 
ports to Duluth. It will thus be ,seen that the Pittsburgh steel in- 
volves the transportation cost for the ore of $1.27. At the same time 
Duluth steel involves a transportation cost for the coal of not over 
40 cents. Eoughly, we find a saving here in favor of Dtiluth steel of 
80 cents on every ton of steel manufactured. The other item of 
importance used in the manufacture of steel is limestone, and we 
are reliably informed that the cost of transporting the limestone 
to Duluth is no greater than is the cost of transporting it to the Pitts- 
burgh district. Thus far we find that the conditions favor Duluth. 
Another important element in the cost of manufacture is labor. It 
is stated by Mr. R. T. Kirkham, of Superior, that climatic condi- 
tions at the head of Lake Superior are such that labor employed in 
steel plants is, on the average, at least 10 per cent more efficient 
than it is in the Pittsburgh district. We know, furthermore, gen- 
tlemen employed by the United Steel Corporation have stated that 
living conditioxis in Duluth and Superior are such that labor em- 
ployed at the Duluth plant is more contented than is the corre- 
sponding labor employed in the Pittsburgh district. This leaves 
as the only other item for us to consider the relative efficiency of the 
Duluth and Pittsburgh plants, and upon this we have the testimony 
of Judge Gary himself, wlio has stated publicly that the Duluth plant 
is more modern and more efficient than the Pittsburgh plants. 

Under all these circumstances we can see no logical justification 
for the continued maintenance of the exclusive Pittsburgh base. This 
base operates to the artificial advantage of steel fabricators in the 
Pittsburgh district and to the tremendous disadvantage of their com- 
petitors in the Duluth and Superior district. Upon this point the 



32 

steel industry committee of the Superior Commercial Club has made 
some inquiry. We asked one local fabricator to explain to us how 
in the world he could compete with Pittsburgh fabricators on large 
contracts. His reply was that such competition is utterly impossible 
and that his concern is practically prohibited from entering many 
important fields as a result of this artificial, unjust, and illegal dis- 
crimination. He said that he had no doubt but that his plant would 
be able to do three times as much business as at present if the dis- 
crimination were abolished. 

It is natural that the various geographical subdivisions of the coun- 
try should desire industrial growth and development. Each district 
has its own natural possibilities. For the Duluth-Superior district, 
with the magnificent fields of iron ore at its very door, the steel and 
iron industry is one of the most natural fields for expansion and de- 
velopment. From time to time fabricators have looked over this 
field and have expressed enthusiasm with regard to the possibilities 
nature has provided. These include a magnificent body of raw ma- 
terial, splendid facilities for both water and i;md transportation, and 
a climate ideal for manufacturing and industrial purposes. But 
almost invariably these fabricators have refused to locate at the head 
of Lake Superior because of the unjust discrimination involved in 
Pittsburgh plus. 

It may be stated by some that there is a greater market for steel 
products in the East than in the West, and Ave may admit the truth 
of this assertion, but this does not eliminate the fact that there is, 
nevertheless, a large and constantly growing western market for 
steel products. It is economically sound that this western market 
should be supplied by western fabricators. Indeed, when this might 
as well be done it is wasteful of the Nation's wealth and energy to have 
those steel products which are to be used in the West manufactured 
in the East and transported to the West. 

We have considered this question of steel prices for many years. 
We have tried to look at the matter fairty and to view it from all 
angles. We have tried to find some just a ad valid reason for the 
maintenance of the exclusive Pittsburgh base, but have been unable 
to do so. We can not imagine why the United [States] Steel [Cor- 
poration] and its allied interests have been so interested in maintain- 
nig this discrimination through all these years in the face of loud 
and repeated protests. 

It operates to the unfair advantage of the fabricators in the Pitts- 
burgh district and we have been finally led to inquire in our oAvn 
minds, " What is the relation of the United [States] Steel Corpora- 
tion and other proprietors of steel plants, who are instrumental in 
maintaining the Pittsburgh base, to these eastern fabricators ? " We 
desire that the Federal Trade Commission should make investiga- 



33 

tions with the view of determining just what fabricating concerns in 
the Pittsburgh district are owned or partially owned by the United 
[States] Steel Corporation or by corporations owning other steel 
plants, or by officials and directors of the United [States] Steel Cor- 
poration or the owners of other steel plants. We make no charges in 
this connection, but we desire to know whether these gentlemen are 
directly or pecuniarily interested in maintaining this unreasonable 
discrimination in favor of possible rival fabricators in other parts of 
the country. 
Respectfully submitted by the Superior Commercial Club. 

A. D. GiLLETT, 

Chaiiinan Steel Industry Committee. 
Pickering & Eieser, 

Superior ^ TFw., Attorneys. 
139378—19 3 



APPLICATION OF THE STATE OF MINNESOTA. 



[In the matter of the Pittsburgh basing point conti'oversy.] 

To the Federal Trade Commission, 

Washington, D. C.: 

Comes now the State of Minnesota, appearing by J. A. A. Burn- 
quist, its governor, and Clifford L. Hilton, its attorne}' general, and 
formally intervenes in that certain proceeding commonly known as 
the " Pittsburgh basing j)oint controversy," instituted by the Western 
Association of Eolled Steel Consumers, reference being had to the 
proceeding entitled as " The application by the Western Association 
of Eolled Steel Consumers for a complaint against the United States 
Steel Corporation, and its subsidiary companies, hereinafter named ; 
and the Inland Steel Co. and the Interstate Iron & Steel Co. and the 
Steel Tube Co. of America," and signed for such association by 
James E. MacMurray, its president, and W. E. McCollum, its secre- 
tary, and by Miller, Starr, Brown, Packard & Peckham, attorneys 
for petitioner, and John S. Miller, of counsel, and which proceeding 
is also referred to in a communication dated August 19, 1919, signed 
by Victor Murdock, acting chairman, and addressed to Charles P. 
Craig, Esq., chairman Joint Committee of Civic Organizations, 
Duluth, Minn. 

The State of Minnesota, among other things, respectfully claims 
and represents that its basis for complaint against the United States 
Steel Corporation and its subsidiaries, referred to in said applica- 
tion, is on the grounds of unlawful restraint of trade and of price 
discrimination, contrary to the provisions of the antitrust acts, and 
in particular of section 2 of what is knoAvn as the Clayton Act of 
October 15, 1914, and of unfair competition in trade, contrary to the 
provisions of section 5 of the Federal Trade Commission act of Sep- 
tember 26, 1914. 

Further in this behalf, it is stated by the State of Minnesota that 
within the borders of the State of Minnesota nature deposited the 
greatest known body of richest and easiest-mined iron ore in the 
world ; that these ore deposits are located in close proximity to Lake 
Superior, which affords through the Great Lakes the lowest-known 
transportation costs for assembling of the additional raw material 
necessary to the production of iron and steel ; that the United States 
Steel Corporation now- has in operation at Duluth, Minn., on Lake 

(34) 



to 



35 

Superior and near to said iron ore bodies, a large plant for the pro- 
duction of steel and a great variety of rolling mill products, but 
that no benefits in price accrue to the people of Minnesota by reason 
of the foregoing conditions; that through agreement between the 
parties complained of herein the consumers in Minnesota must pay 
the fictitious and arbitrary price charged for steel products at Pitts- 
b/urgli plus the freight from Pittsburgh to Minnesota, now $9.90 per 
ton, and Minnesota consumers must pay the price even though the 
fitiser has been rolled at the corporation's mills in Minnesota from ores 
mined near by and when no transportation services have been ren- 
dered or freight charges earned or paid. 

Further claiming, the State of Minnesota asserts that there should 
be a basing point established at the mills in Minnesota as well as 
at Chicago, 111., and, probably elsewhere, in addition to the present 
basing point at Pittsburgh, Pa., and that the. base price so to be estab- 
lished at the mills in Minnesota be on a parity with that of Pitts- 
burgh and no less favorable to the consumers in Minnesota. 

The State of Minnesota respectfully urges that your honorable 
Conrmission institute a proceeding in respect to the violation of the 
Jaws hereinbefore referred to, over whicli the Commission has juris- 
diction, to the end that the people of the State of Minnesota may re- 
ceive substantial justice and enjoy the fullest benefits economically 
possible of her natural resources and favorable situation, and that 
said State of Minnesota be advised as to all proceedings taken there- 
under and that it be permitted upon due notice to introduce evidence, 
file briefs, make oral arguments, or otherwise participate in the hear- 
ings that may be had by said Trade Commission as it may be ad- 
vised, holding itself in readiness, if the Commission so desires, to 
file a fuller and more complete complaint with statements in detail 
as to the facts upon which complaint in intervention is desired. 

Eespectfully submitted. 

State of Minnesota, 
By J. A. A. Burnquist, 

Governor. 
By, Clifford L. Hilton, 

Attorney General. 

St. Patjl, Minn,, August £S, 1919. 



APPLICATION OF JOINT COMMITTEE^OF CIVIC ORGANIZATIONS OF DULUTH. 



[In the matter of the Pittsburgh basing point controversy.] 

To the Federal Trade Commission, 

Washington, D. C: 

Comes now the Joint Committee of Civic Organizations of the 
City of Duluth, composed of duly accredited representatives from 
the following civic bodies of the City of Duluth, the Commercial 
Club, Eotary Club, Kiwanis Club, Duluth Board of Eealtors, Re- 
tail Merchants Association, Builders Exchange, West Duluth Com- 
mei-cial Club, West End Commercial Club, and New Duluth-Gary 
Commercial Club, by Charles P. Craig, its chairman, and formally 
intervenes in that certain 2:)roceedings known as " the application by 
the Western Association of Eolled Steel Consumers for a complaint 
against the United States Steel Corporation, and its subsidiary com- 
panies, hereinafter named; and the Inland Steel Co. and the Inter- 
state Iron & Steel Co. and the Steel Tube Co. of America," and 
signed for such association bj^ James E. MacMurray, its president, 
and W. E. McCollum, its secretary, and by Miller, Starr, Brown, 
Packard & Peckham, attorneys for petitioner, and John S. Miller, 
of counsel. 

The Joint Committee of Civic Organizations of Duluth among 
other things claims and represents that as and for its basis for com- 
plaint against the United States Steel Corporation and its subsidia- 
ries, etc., referred to in said application it relies upon all of the facts 
and grounds set up by the State of Minnesota appearing by J. A. A. 
Burnquist, its governor, and Clifford L. Hilton, its attorney general, 
in its petition dated August '25, 1919, for permission to intervene in 
this action. 

Further claiming, the Joint Committee of Civic Oi'ganizations of 
the City of Duluth states that the United States Steel Corporation 
has in Duluth a plant for the production of steel the construction of 
which is of the very best modern type for economical production and 
is capable of pi'oducing at the lowest possible cost, taking advantage 
of the latest devices and improvements for that purpose and making 
use of all by-product processes. This plant is located on Lake 
Superior in close proximity to the iron ore supply, and yet by rea- 
son of artificial, unfair, and arbitrary price-fixing methods employed 
by the combination of steel interests named herein this community 
is deprived of the right of erecting and operating subsidiary mills 
for the fabrication and sale of secondary iron and steel products in 

(36) 



37 - 

competition with Pittsburgh, which is highly and wrongfully pre- 
ferred in price schedules by said combination of steel manufacturers, 
all of which denies to this community and the State of Minnesota 
the right to develop the iron industry within its borders and enjoy 
the fullest economic advantages from its natural resources; denies 
to the producers on the farms of the State the right to enjoy the 
broader nearby and logically higher market price for his products 
which would result from the largely increased population incident 
to the full development of the iron industry and large saving of 
freight charges, middle men, and losses in transit. 

Further claiming, this committee asserts that there should be a 
base price established f. o. b. the mills of the United States Steel 
Corporation in Duluth and that such base price so to be established 
at such mills be on a parity with that of Pittsburgh and no less 
favorably to the consumers in Duluth and Minnesota. 

The Joint Committee of Civic Organizations of Duluth respect- 
fully urges that your honorable commission institute a proceeding 
in respect to the violation of the laws to which reference is herein 
made, to the end that the people of Duluth and the State of Minnesota 
may receive justice and enjoy the fullest benefits economically pos- 
sible of their natural resources and favorable situation, and that this 
committee be advised as to all proceedings taken thereunder, and that 
it be permitted upon due notice to introduce evidence, file briefs, make 
oral arguments, or otherwise participate in the hearings that may be 
had bj' said Trade Commission as it may be advised, holding itself 
in readiness, if the commission so desires, to file a fuller and more 
complete complaint with statements in detail as to the facts upon 
which complaint in intervention is desired. 

Respectfully submitted. 

Joint Committee of Civic Organizations, 
ByCHAs. P. Craig, Chairman. 

Duluth, Minn., August 30, 1919. 



So THE People May Know.— A Peimer on the Steel Base Pkice. — .Joint Com- 
mittee OF Civic Organization. ■ 

Duluth stands iov being macle a basing point for steel billets and all primary 
rolling-mill products, and tbat such basis sluill be no less favorable than Pitts- 
burgh, both in respect to price and the scope of its application. 

the case stated. 

Duluth stands for being made a basing point for steel billets and all primary 
rolling-mill products and that such basis shall not be above Pittsburgh. 

Duluth is not asking for any special addition to the present plant, nor any 
si)ecific new plant or plants, nor that a base price be made only on such prod- 
ucts as may be turned out by the plant no\v located here. 



-. - 38 

Duluth is asking for a universal base no less favorable than Pittsburgh both 
in respect to price and the scope of its application. ■ ■. 

Duluth is asking for the recognition and application of a principle of economic 
justice and not for the construction of any concrete plant, plants, or additions, 
much as we would appreciate recognition in that way. 

Undeniably there exists bitter disappointment at the failure of the corporation 
or independents (so called) to grant this community any of the unprecedented 
number of additions to and many great new plants which have been either built 
or are under construction at the present time. 

THE MEANING OF " PlTTSliUKGH PLUS." 

If you are a consumer of steel in Minnesota, and you have occasion to buy 
the products of the Minnesota Steel Co.'s plant at Steelton, you must pay the 
same price as a consumer in Pittsburgh or Chicago would pay plus the freight 
from Pittsburgh or Chicago to Duluth. 

If you are a manufacturer in Duluth, using primary rolling-mill products for 
fabrication into various articles of connnerce, you must pay the same price for 
your raw steel that a Pittsburgh or Chicago competitor pnj's, and on top of that 
pay the freight to Duluth, and you must pay this freight even though the steel 
is rolled on Duluth's doorstep and the ore mined in her back yard. 

If you owned a nail factory in Duluth and your factory cost was the same 
as manufacturers of uails in Pittsburgh you could not ship your nails to Brai- 
nerd in competition with them. Why? Because the freight you must pay from 
Pittsburgh to Duluth, plus the freight from Diihith to Brainerd, is greater than 
the freight from Pittsburgh to Brainerd. So that even though we have the 
ore, the furnaces, the rolliiig mill, and the nail mill, Pittsburgh can supply 
Brainerd cheaper than Duluth. 

The Leonidas mine, leased by the corporation from the State of Minnesota—^ 
one of the richest and cheapest open-pit mining propositions in the world — will 
contribute 1,900,000 tons of its ore this year ; the State gets 25 cents per ton. 
The profits of the corporation, based on the figures of its 1917 report, will be 
more than $30,000,000, and yet the people of Minne.sota must pay on every keg 
of nails, roll of fence wire, or other product of this ore the freight from Pitts- 
burgh to Minnesota. Pay this, even though the steel is rolled, in the plant of 
the Minnesota Steel Co. in Duluth from ore out of the Leonidas mine. 

This is the doctrine of " Pittsburgh plus.". 

JIINXESOTA'S' lilBTHKlGHT. 

By reason of the providential deposit within her borders of the greatest 
known beds of the richest iron ore in the world, Minnesota is entitled to be- 
come chief among American Commonwealths, in the iron industry if natural 
laws were permitted to prevail and her industries to develop on the merits 
of her location and natural resources. 

This distinction she does riot now enjoy and never can enjoy^ under the shadow 
of Pittsburgh plus, the arbitrary maintenance of which denies to Minnesota 
her natural rights and confers them upon others. 

No corporation or combination of interests has the right to transport the 
n&tural resources of this eomnhihity to som6 far off and less economic poinffor 
manufacture, merely for convenience, or because its nulls are there, and add 
tlie freight to the price charged the people of Minnesota. 

Sui)poge the mining interests of Minneapolis were to del ermine that the East, 
where they grow very little wheat, w>is more to their pleasure and more con- 



39 

venient for the grindinfr of all the wheat of the Northwest and establish fheir 
mills and charge the consumer of Minnesota the freight on the wheat to the 
East and on the flour back. That is " Pittsburgh plus." 

A MOKAL OBLIGATION. 

This community has an unbrol<en record of loyalty to the United States Steel 
Corporation. Local interests have always been willingly subordinated to those 
of the iron interests because those interests were regarded as our largest and 
most important business partner in the work of building here a great indus- 
trial city. 

The steel interests owe more to Dulutli than to any other community. 

From Minnesota's natural resources comes SO per cent of tlie iron ore of the 
corporation, and in Minnesota there lies in the ground, except as it has already 
been removed, every dollar of the millions of millions of value represented 
by its common stock and without whicli the greatest corporation in tlie world 
to-day would liave been a failure. 

The combination of steel interests owe more to Minnesota than to any Com- 
monwealth in the world and should be zealous always to study ways of return- 
ing to her in the fullest possible mea.sure the vast contribution which she has 
made and is making to their wealth. They are not recognizing this moral 
obligation. 

Suppose the owners of sawmills in Duluth also owned sawmills in an eastern 
section that had no timber, and that these mills were owned by the same people 
who owned the forests of Minnesota. Suppose such combined interests should 
compel the shipment of the logs to the eastern mills and charge the people of 
Minnesota who use the lumber the freight on the logs East and the lumber back? 
That is " Pittsburgh plus." 

THE JIATTER OF PATKIOTISM. 

"A sound local patriotism not inconsistent with an intense spii'it of national 
patriotism." 

Despite the fact tliat it has been clearly stated on behalf of this community, 
and admitted by J. A. Farrell in his letter of November 2G, 1917. that loyalty 
to the Nation is not involved on the side of either party, yet it is occasionally 
being advanced as an argument for postponing the discussion of Pittsburgh 
plus. 

There is no question about the national loyalty of the citizensliip of Duluth; 
this community and county have stood not midway but at the very front in all 
war activities. It is not necessary to remind them to be loyal. But how can 
the recognition and putting into effective operation now of a just economic 
principle affect the war? Indeed, this is a time when it is peculiarly a duty to 
look now to the welfare of the conmiunity after the war. 

If no mills or manufactories are started now in this period of phenomenal 
expansion, what chance will there be after the war, wheh capacity for produc- 
tion is far beyond consumption? 

The corporation's officials owe to Minnesota and to Duluth the time necessary 
to consider and grant this request now, M'hich in reality is very simple. 

If not granted when there is such enormous demand for increased production, 
in what position will Duluth be after the war, when inevitably there will be 
capacity much in excess of demand? 

If this were a request for a concession the argument of war business might 
excuse immediate action, but this is purely the granting of a principle of justice, 



40 ... 

and Justice should not wait until after the war or upon the contingency of 
convenience. 

A WAK PROGRAM. 

Great Britain, as a part of her war prograrcj, is providing for the emergencies 
that will necessarily arise . when the war closes. The British Ministry of 
Reconstruction has well advanced the organization of this work. France has 
a like program well under way. Our Nation, being admittedly behind other 
great powers, should not prevent our State from herself planning for a greater 
Minnesota industrially, agriculturally, and commei'cially. We possess certain 
great natural resources — ^potential possibilities that invite inquiry and appeal 
with peculiar strength to such program. 

To provide for the inevitable emergencies growing out of war, but arising 
after its conclusion, are just as much emergencies of the war, therefore our 
present concern, as though such emergencies arose during the war. To provide 
that Minnesota shall not suffer beyond her sister States ; to provide for the 
conservation, maintenance, and increased usefulness of her natural resources ; 
to provide, if possible, that she shall be a leader among States is rising from 
the depression of a world conflict into an era of industrial expansion, is a 
present imperative duty resting upon every citizen and the citizenship as a 
whole. 

Eighty per cent of the ore supply of the United States, so far as known, is in 
northern Minnesota. This is practically all shipped to the Pittsburgh and 
Chicago districts and changed into steel. These products are then shipped back 
to the region that supplies the ore, and the price charge<l for them includes 
the freight on 2 tons of ore East and 1 ton of steel back. 

THE PRODUCER OF MINNESOTA. 

The development of the iron industry within the State would mean a large 
industrial population. This community believes it to be fundamentally just 
that the producer on the farms of the State should enjoy the right to the 
broader, near-by, and logically higher market price for his products which would 
result from the largely increased population incident to full development of 
the iron industry. 

The producer should not be compelled, as at present, to ship his products 
1,500 miles away — pay the freight, losses in transportation, and charges of 
middlemen — just because the mills belonging to the steel combination happen 
to be in the East, established there in the beginning because near to the ore 
supply, then in Pennsylvania and New York State, centralized through 30 years 
of close guarding and perpetuated after the ore supply shifted to Minnesota 
only by the adoption of the fiction of Pittsburgh plus. 

THE CONSUMER OF MINNESOTA. 

By virtue of the phenomenal deposits of cheaply mined high grade iron ore 
within the confines of Minnesota, consumers of iron and steel possess the right 
inherently, and as a matter of plain justice, to buy iron, steel, and products 
derivative thereof at :i jjrice based upon its manufacture at the nearest 
economic point. If the corpoi'ation elects to numutacture at distant points it 
must grant to Minnesota the price which would have resulted from its manu- 
facture here. No combination of steel producers lias tlie right to "deny to this 
conuiuinity its right to develop and enjoy the fullest economic advantages 
from its natural resources. 



41 

A few have asked, is it uot an unwarranted interference with the right of 
a corporation to choose its own point for doing business? The answer is, 
we are not telling the corporation where to conduct its business but saying 
that it shall not deprive us of our right to say where we shall do our busi- 
ness. 

A PKOBLEM IN ECONOMICS. 

Duluth is told that the total capacity of the Duluth steel plant must 
be devoted to the production of ingots and shipped East by rail to supply 
the new finishing mills which are being built to roll plates and ship materials 
for fabrication into ships for the Government, yet to the extent of 200,000 
tons these same plates and ship materials are being reshipped by rail to the 
head of the Lakes to be fabricated into ships for the Government this present 
season of 1918. 

That is to say, 50 per cent of the total capacity of the Duluth plant is burden- 
ing the railroads to the extent of 200,000 tons East and the same West. 

Not only that, but the freight is causing the ships to cost the Government 
more than $2,000,000 in excess of what the cost should have been if one or 
more such finishing mills had been built here and the plates rolled here. 

The system of Pittsburgh plus is responsible. Is this helping to win the 
war? 

That a manufacturer in Duluth should be charged and have included in 
the price he must pay for the raw materials — the pi'oducts of the steel mill iu 
Duluth — an excessive sum based upon the fiction that 2 tons of ore have been 
shipped to Pittsburgh or Chicago and a ton of steel back, and the freight 
paid, when iu fact no ore was shipped East and no steel back, and no freight 
paid — that is Pittsubrgh plus. 

Pittsburgh plus is a moral wrong. 

PITTSBUBGH PLUS SPKLLS DULUTH MINUS. 

That the United States Steel Corporation realizes this is brought home to 
us by the frank advice of a big salaried official to a Duluth manufacturer : 
" You ai"e in the wrong location. Instead of fussing about a base for Duluth, 
move to where our prices are favorable; we can't make a base price for 
every hamlet in the country." 

Conceive, if you can, the mental condition of a man unable to dilferentiate 
the claims of Duluth from those " of every hamlet in the country." 

Until the mental attitude of the corporation officials changes, and they cor- 
rect a situation which forces them to advise factories now here to locate at 
points more favored by them, there can be little hope for our growth in the 
iron industry. 

This situation will be corrected by granting Duluth's request to be made a 
basing point for all primary rolling mill products on a basis not less favorable 
than Pittsburgh. 

UNWABT5ANTED INTERFEEENCE WITH BUSINESS. 

Is it an unwarranted interference with the right of a corporation to locate 
its mills wherever it chooses for this comnnmity to request an f. o. b. Duluth 
delivery on all primary rolling-mill products? Duluth thinks uot. 

First. It is quite obvious that base price, limited only to the products of the 
Duluth mill, would be of little value in encouraguig the locating here of fac- 
tories for the fabricating of products having raw steel for their base because 
the corporation could so adapt the products of this mill as that very little or 



42 

none of its output conld be consumed here, or, in times of overproduction, cotild 
close this mill among the first, in wliich case factories located here, depending 
upon Pittsburgh base to reach their marlfet, would be closed if compelled to 
pay Pittsburgh plus. 

Second. The iron-ore beds were placed in Minnesota by the act of Providence; 
the people living here, and in proximity to them, have an economic right to the 
use and ftill benefit of that natural resource, and no combination of Interests 
has the right to take away any part of such economic advantage. The fact that 
a system has grown up which up to this time has prevented such full enjoyment 
is no reason for its continuance. 

Third. If doing away with Pittsburgh plus incidentally forces the erection 
here of steel mills to produce a wider range of products, that is a matter inci- 
dent to the granting of a just economic principle and not an \mwarranted inter- 
ference with their choice of where they shall manufacture. If they build here 
it will be the duress of law or of economics and not the duress of public opinion. 

HELP WIN THE WAR. 

When the United States Government found it necessary that the full produc- 
tive energy of Chicago's iron manufacturers was a necessity to the winning of 
the war, it found that these manufacturers were obliged to add $2 per ton to 
Pittsburgh prices because of the differential which the combination of steel 
interests had fixed on Chicago in the way of a price over Pittsbui'gh base. In- 
quiry on the part of the Government promptly disclosed that costs were no 
greater in Chicago and that this was an arbitrary and artificial differential 
maintained against Chicago, and promptly ordered its removal, so that Chicago 
fabricators of steel might go to the fullest extent, enlarge their plants, build 
new ones, and contribute their energy. 

WHY NOT MINNESOTA? 

The granting of this principle of economic justice for which Duluth contends 
would result in innuuieral>le mills b.eing built in Minnesota, fabricating the 
primary products in rolling mills. If this base price is not put into effect now, 
and we are not started on a program of development of mills here now, while 
war demands great increases, then no development of consequence will come 
here during the next two decades. 

The war boards at Washington are now seeking to transfer activities in war 
industries from the congested centers of the East to the West. It should not 
be necessary to call the attention of the steel interests to IMinnesota's claim, 
but if they persist in ignoring them, it is the duty of citizens to urge such claims 
and urge them now. 

The mines of Minnesota constitute the bases and one ultimate physical neces- 
sity to the successful waging of this war. But for them the United State.s 
could not wage war. 

A DOXTBTFUI. BOAST. 

We not infrequently glibly quote the phrase : " Duluth-Superior Harbor is in 
point of tonnage second only in importance in the United States." 

But we wisely refrain from correlating with this statement of fact that other 
equally patent truth, viz : that in point of value per ton we are practically the 
lowest. What is the answer? , Obviously it is: develop manufactories. Fabri- 
cate our wealth of raw materials at home. Development of the iron industry 
can not be accomplished under the shadow of " Pittsburgh plus." 



48 

Forty-five million tons of iron ore passed over the docks at Diiluth and Two 
Harbors during the season of 1917. The vahie of that ore at the docks was 
approximately $140,000,000. Shipped East and manufactured into primary 
steel, it had a value of $1,350,000,000, almost ten times the value of the ore 
Vvhen it left our shores, and who will undertake to estimate the stupendous 
value of this ore fabricated into secondary products in factories located in 
Pittsburgh and Chicago, whose location is inexorably fixed by the doctrine of 
Pittsburgh plus. 

This $1,210,000,000 ditference in value bet^^'een the ore here and the primary 
steel is represented by just four elements : 

Freight (a small item). ■ ■ 

Capital investment in gi-eat plants. 

Permanent additions to the wealth of the community (a great item). 

Pay rolls to the industrial millions (a tremendous item) and pi'oflts. 

In the operation Minnesota loses permanently $12,000,000 of her taxable 
wealth. Pittsburgh and Chicago gain $1,210,000,000. 

NO COMPEOMISE. 

The question is asked, Will it be substantial compliance with Duluth's re- 
quest if the United States Steel Corporation makes delivei-y f. o. b. Duluth at 
Pittsburgh base on the products which it may from time to time in its dis- 
cretion manufacture at its plant in Minnesota? The answer is, it will not. 

Suppose you are now a manufacturer in Duluth requiring raw, or primary, 
steel as the basis of your industry, and have built up a market for the distri- 
bution of your products over a broad territory, made possible (as would be the 
case^ solelv becaiise you are able to purchase your raw material f. o. b. your 
factory at Pittsburgh base. 

What M'ould you do if, having undertaken to fill large contracts, you were to 
be told that the plant here had none of the material on hand and were not 
longer rolling that product here, but that they could furnish you from Pitts- 
burgh— plus freight — "Pittsburgh plus "2 

The dilference in your raw material cost would likely be more than your 
profit. 

. . What would you do, if in a period of overproduction, or other reason, this 
plant were to shut down? You must of necessity shut down because you co;jld 
not meet your competitors on Pittsburgh plus prices for your raw materials. 

No concern now here could risk extending its trade territory upon such un- 
certainty, and no industry seeking a location here could afford to take the risk. 

A SHADOW VICTORY. 

If Duluth were to be granted a base price only on such products as 
from time to time the United States Steel Corporation in its discretion may 
produce at the Duluth plant, Duluth would be accepting the shadow and not 
the substance of its contention. 

Suppose the corporation decided that instead of rolling a large variety of 
shapes it would be more convenient or expedient to confine this mill to but 
3, 4, 5, or even 6, specific things. Such determination would automatically 
limit the industries that could come here^ — if such industries were already here, 
Would drive them awaj'. 

Suppose the corporation decided to do, as one of its very high salaried em- 
ployees said it intended to do, viz., produce nothing but intercorporation or 
senvifiuishfd products at tlie Duluth plant, to be seut to finishing mills of the 
corporation located elsewhere. In such case -an f. o. b. Duluth delivery woiiid 
be of no value whatever. 



44 . " 

citizens of Minnesota have the right, by virtue of Minnesota's position at 
the western terminus of the cheap water route on the one hand, and her great 
iron ore resources, on the other, to fabricate her raw materials without limi- 
tations other thao economic, and to distribute these products over that cheap 
water route to the East, South, and West just the same as the East, protected 
by Pittsburgh plus, now exclusively enjoys the right to distribute them over 
the same route in the Northwest, South, and Southwest. 

It is scarcely conceivable that any combination of interests will attempt to 
deny this right. 

PITTSBUKGH PLUS NOT A DULUTH TOWNSITE PKOBI-KM. 

The steel interests should realize, if they do not already know, that this 
economic question is not a local or townsite question ; it concerns the farmers 
of Minnesota, which means more than half of our population. More than that, 
it concerns the farmers in all of the States and all of the people north and 
west of a line drawn from Duluth, southwest to Omaha (kno^ni as Banning's 
Line) every foot of which is nearer to Minnesota's great inland seaport and 
her iron ore beds than to Chicago. 

When the president of one of the local constituent companies stated to the 
steel base committee that " the entire business of all the territory allotted to 
the IMinnesota Steel Co.'s plant, including the business of the Independents, 
would not keep the local plant busy three months in the year," he did not grasp 
the siguilicance of the vast territory and when the people who would be af- 
fected, because when asked by the committee what territory was allotted to 
the Duluth plant, he replied : " Minnesota, part of Wisconsin, North Dakota, 
Montana, and Idaho." He failed to take into consideration that the distance 
from Duluth to Buffalo over the great cheap water route is no greater than 
from Buffalo to Duluth, or that there was a vast territory accessible to that 
same water route nearer to Minnesota than to Pittsburgh or New York. He 
failed to grasp the possibilities of reaching south into what is now Chicago 
territory and the the Western coast. Though he admitted that, " it would be 
possible for President Farrell and Judge Gary to ' take on ' additional territory 
for this plant ' if they so desired.' " 

Minnesota stands first in Commonwealths in sound cultural methods — her 
farmers as alert to so conduct her agriculture as to leave the land richer than 
they found it and thus transmit to po-sterity a perpetually greater heritage. 
Such men know that the removal this year of $12,000,000 of the assessed value 
of our iron ore (one twenty-fifth of the whole) is permanent depletion. What 
answer shall we make to them? 

WHO IS TO BLAME. 

In the discussion of the crime of Pittsburgh plus, the United States Steel 
Corporation is generally named, because it is the biggest single interest and 
dominating influence in the iron and steel industry. 

It is well to remember the corporation mines but 4.5 per cent of our iron ore; 
that 55 per cent is mined by the so-called " Independents " ; and that whilst the 
corporation has constructed a plant in Duluth, though denying to us more than 
one-half of its benefit, the Independents have never given even serious con- 
sideration to the subject. 

The Independents are at fault. Not one of them has ever done anything for 
Duluth, and. if the truth were known, are at the bottom of why Duluth, ftlinn., 
and the Northwest pays Pittsl)urgh plus. 



45 

Duluth's contention being for the recognition and putting into effective oper- 
ation of a principle of economic justice, as distinguished from a contention 
against any single person or interest, is therefore not against the corporation 
alone, but against the Independent and the combination of Interests, which for 
their own convenience conspire to perpetuate a wi'ong. 

The Independents are equallj' at fault and suspiciously near to being the 
chief offenders. 

WHAT IS "the answer"? 

If a steel plant definitely promised to Minnesota in January, 1907, to be 
completed in 1909, and furnish " cheap, raw materials " — reassured to her In 
1909 to be built in 1910 by one authority, and in 1911 by two others — promised 
in 1913 to be completed in 1914, is not actually completed till June, 1916, and 
then its products sold on the theory that they have been made in Pittsburgh, 
shipped to Duluth, and the freight paid. Is that good faith? 

Oh ! but they say : " Could you expect us to complete the Minnesota plant 
when our present capacity was not being used?" And yet from the time this 
plant was promised to the time it was completed the iron industry increased 
350 per cent, gauged by the ore shipped from Lake Superior. Witness the 
figures: 1906, 18,000,000 tons; 1916. 64,000,000 tons. How can these figures be 
reconciled with the foregoing broken promises and lame excuse? 

These solemn facts furnish an interesting speculative problem : If it required 
an increase of 350 per cent in the iron indu-stry and 11 years' time to start 
one plant in Minnesota, what increase in the industry and how many years 
will it require to make of this a iron industrial Commonwealth? 

If we accept " lack of business " as an excuse for the completion of a plant 
in 1916, that was definitely promised in 1907, with the impelling force of the 
greatest war in history necessary to start it, then truly Minnesota's dream 
will never come true, because her ores will be exhausted decades before we 
reach a creditable start on the way to our rightful destiny. 

THE SYSTEM VERSUS NATtTRAI, LAWS. 

If natural laws should prevail, Minnesota would be supreme in the iron 
industry. 

Trade combination defies economic law, and Pittsburgh plus denies to Minne- 
sota its birthright and to Duluth the natural advantage of its location. 

There should be cooperation between Minnes.ota and the steel interests, but 
the obligations and benefits of all copartnerships must be reciprocal. 

Duluth stands for being made a basing point for steel billets and all rolling- 
mill products and that this base shall not be above Pittsburgh base. 

We decline emphatically to recognize the right of any corporation to take 
away what is the natural right of this community and bestow it upon another. 

There is no more dangerous case of discrimination, and therefore no more 
serious evasion of the antitrust laws, than Pittsburgh plus. 



[In the matter of the Pittsburgh basing point controversy.] 

To the Fedkeal Trade Commission, 

Washington, D. C: 
Comes now the Joint Committee of Civic Organizations of the 
City of Duhith, composed of duly accredited representatives from 
the following civic bodies of the city of Duluth, the Commercial 



46 

Club, the Eotary Club, Kiwanis Club, Dulutli Board of Eealtors, 
Retail Merchants' Association, Builders' Exchange, West Duluth 
CoDimercial Club, West End Commercial Club, and New Duluth- 
Gary Commercial Club, by Charles P. Craig, chairman of said joint 
committee, and for its amended complaint in intervention in that 
certain proceeding known as "The application by the Western 
Association of Eolled Steel Consumers for a complaint against the 
United States Steel Corporation and its subsidiary companies, here- 
inafter named, and the Inland Steel Co. and the Interstate Iron & 
Steel Co. and the Steel Tube Co. of America," and signed for such 
association by James E. MacMurra}^, its president, and W. E. Mc- 
CoUum, its secretary, and by Miller, Starr, Brown, Packard & Peck- 
ham, attorneys for petitioner, and John S. Miller, of counsel, stated: 

I. 

That the Joint Coimnittee of Civic Organizations of Duluth, 
among other things, claims and represents that as and for its basis 
for complaint against the United States Steel Corporation and its 
subsidiaries, etc., referred to in said application, it relies upon the 
fact that their acts, hereinafter set forth, constitute unlawful re- 
straint of trade and price discrimination contrary to the provisions 
of anitrust acts, and in particular of section 2 of what is known as 
the Clayton Act of October 15, 1914, and unfair competition in 
trade contrary to the provisions of section 5 of the Federal Trade 
Commission act of September 26, 1914, 

II. 

Further in this behalf, it is stated by this intervener that within 
the borders of the State of Minnesota are deposits of the. greatest 
Ivnown bodies of the richest and easiest mined iron ore in the world 
and the most suitable for the manufacture of iron and steel products ; 
that these ore deposits are located in close proximity to Lake Su- 
perior, which affords, through the Great Lakes, the lowest known 
transportation costs for assembling of the additional raw mate- 
rials necessary to the production of iron and steel; and that these 
essential raw materials are being delivered and can be delivered at 
the steel-product plants in Minnesota at as low cost as the same can 
be delivered at the steel plants at Pittsburgh, Pa., or at any other 
point in the United States outside of Birmingham, Ala. 

IIL 

This intervenor further represents that the United States Steel 
Corporation now has in operation at Duluth, Minn., on Lake Su- 
perior and near to said iron ore bodies, a large plant for the pro- 



47 

cluction of steel and a gi-eat variety of rolling-mill products, the 
construction of which is the best modei'n tj'pe for economical pro- 
duction and is capable of producing at the lowest possible cost, 
taking advantage of the latest devices and improvements for that 
purpose and making use of all the bj'^-product processes; that the 
cost of skilled and other labor necessary and employed in the pro- 
duction of steel products at the Duluth plant or mills is not 
materially greater than the cost thereof at the Pittsburgh mills; 
that the iron ore product from the mines adjacent to Duluth is 
delivered and can be delivered at the Duluth plant at a much 
lower cost than the iron ore is delivered or can be delivered at the 
Pittsburgh plant ; that between 80 and 90 per cent of the iron ore 
used in the manufacture of steel-base products at Pittsburgh is 
shipped from the iron mines near Duluth; that steel-base products 
are produced and can be produced at Duluth, Minn., at as low a 
cost as the same are produced or can be produced at Pittsburgh; 
that there is a population of more than 6,000,000 people engaged in 
the diversified industries and occupations in the States of Minne- 
sota, North Dakota, South Dakota, Montana, Wyoming, Washington, 
Oregon, and the Province of Manitoba, referred to herein as being 
tributary to Duluth, which can be supplied with all kinds of manu- 
factured steel products from steel mills at Duluth, over the existing 
systems of transportation lines, at a lower cost than they can be sup- 
plied from the mills at Pittsburgh or from mills at Chicago, 111., or 
from any other point where steel can be economically produced 
and at the same time leave to the producers of such products a 
reasonable profit over the cost of production; that this population 
buy and use these steel products to the same extent as populations 
of other disiricts ; that there is a population of more than 15,000,000 
people engaged in diversified industries and occupations in the States 
of Wisconsin, Iowa, Nebraska, Kansas, Colorado, Utah, Oklahoma, 
Texas, New Mexico, and Arizona, also referred to herein as being 
tributary to Duluth, who can be supplied and who should be sup- 
plied with all kinds of steel products from steel mills at Du- 
luth, Minn., over the existing systems of transporation lines, in 
competition with similar steel mills at Chicago, 111., and at a less 
price than from similar steel mills at Pittsburgh because of the 
less freight charges. 

IV. 

That within the city of Duluth and the cities of St. Paul and 
Minneapolis, about 150 miles from Duluth, and other cities of the 
State of Minnesota, there are many large manufacturing plants which 
fabricate secondary steel products and which buy the base-steel prod- 



48 

ucts from the United States Steel Corporation, or Minnesota Steel 
Co., one of its subsidiaries, produced in its steel mills in Duluth. 

V. 



This intervenor further charges and states that notwithstanding 
the natural advantages for the cheap production of steel at the city of 
Duluth and the present very extensive systems of transportation lines 
over which freight can be distributed over large areas herein referred 
to as tributary to Duluth at a less cost than the same can be dis- 
tributed from Pittsburgh or even from Chicago, the United States 
Steel Corporation and its subsidiaries referred to herein have been 
and now are wrongfully and unlawfull}- charging to consumers and 
users of its steel products produced at its mills in Duluth, at Duluth, 
St. Paul, Minneapolis, and other cities and communities tributary to 
its plant in Duluth the same price that it charges the consumers of its 
steel product at Pittsburgh, with the freight from Pittsburgh to the 
point of delivery added, which in the case of Duluth is $9.90 per ton 
additional. 

VI. 

This intervenor further charges and states that the United States 
Steel Corporation and its subsidiaries at Chicago and Joliet, 111., and 
Gary, Ind., and the other respondent companies named in the appli- 
cation of the Western Association of Steel Consumers filed herein are 
producing steel products at Chicago, Joliet, and Gary, the above- 
named cities, at a less cost than said steel products are being produced 
at Pittsburgh, and that they and each of them are selling and are 
wrongfully and unlawfully charging for the same to manufacturers 
in Duluth, St. Paul, Minneapolis, and other Minnesota cities and in 
other cities in the territory tributary to Duluth the same price or 
prices which the United States Steel Corporation charges for the same 
products at Pittsburgh, plus what the freight would be on these 
products from Pittsburgh to the points of deliver}'; that the amounts 
included in the prices so charged to said consumers, which is the 
amount of the freight charges upon said products from Pittsburgh, 
Pa., to Duluth, Minn., St. Paul and Minneapolis, Minn., and other 
points of delivery, are unearned and arbitrary and extortionate, no 
freight charges being earned or being paid thereon. 

VII. 

This intervenor further charges and states that prices charged by 
the United States Steel Corporation and its subsidiaries and the 
respondents referred to herein for the steel products sold by them 



49 

respectively at the said mills located in Duluth, Minn., Chicago and 
Joliet, 111., and Gary, Ind., are fictitious, arbitrary, excessive, and 
inequitable, and, as this intervener is informed and believes, are the 
result of secret, unlawful understandings and agreements between 
said United States Steel Corporation and its said subsidiaries and 
said other respondents, and of combinations between them and other 
manufacturers of fabricated steel products in the vicinity of Pitts- 
burgh, to prefer and give advantage to manufacturers of fabricated 
steel products at and in the general vicinity of Pittsburgh and to 
exact higher prices for the base-steel products produced at their mills 
in Duluth, Chicago, Joliet, and Garj aforesaid than the cost of pro- 
ducing of such products at said places with a reasonable profit added 
thereto, and to prevent the persons and parties interested in and 
operating allied secondary steel industries now located at the points 
now nearer to respondent's steel plants at Pittsburgh from establish- 
ing steel plants for the production of base-steel products in the ter- 
ritory tributary to Duluth to meet the present demand and the ever- 
increasing demand for fabricated steel products in the territory 
tributary to Duluth, to the damage, detriment, and harm of the peo- 
ple of the city of Duluth and of the Commonwealth of the State of 
Minnesota and of the territory tributary to Duluth in this : 

(a) It requires every consumer in such territory and cities to pay 
a very considerable sum more for the steel product purchased by 
him than the cost of producing such product and a reasonable profit 
on account of such product, making it difficult for manufacturers of 
fabricated iron and steel products who purchase base-steel from 
respondents at the prices which they have paid therefor and must 
pay therefor to do business at a profit, being forced to do business in 
violation of the natural laws of trade and business and in competition 
of manufacturers of like fabricated products at or in the vicinity of 
Pittsburgh who have such preferential, rate as herein set forth. 

(6) It prevents and discourages the building up of manufactories 
in said cities and territory and retards the growth and development 
which naturally belongs to them. The people of every section of our 
great country have a right to the natural opportunities and resources 
which are appurtenant to and contained within those sections, and 
the further right to develop the same commercially and industrially 
in the usual, customary, and natural manner without let or hindrance 
from any body or organization of any other section or in the interests 
of any other section of our country. The acts of the respondents 
herein complained of deprive the people of the section of country 
herein described as tributary to Duluth from having built up numer- 
ous manufactories of secondarj^ fabricated iron and steel products 
within this territory and from which the people living therein can 
139378—19 i 



50 

be supplied at a much lower cost than they are now supplied by- 
respondents or than they will be supplied on account of the unlawful 
and discriminatory prices now charged by them. The acts of re- 
spondents complained of herein denies to the city of Duluth and the 
State of Minnesota the right to develop the iron industries within its 
borders and enjoy the fullest economic advantages from its natural 
resources ; denies to the producers on the farms of the State the right 
to enjoy the broader near-by and logically higher market price for 
his products which would result from the largely increased popula- 
tion incident to the full development of the iron industries and large 
saving of freight charges, middle men, and losses in transit. 

(c) It tends to build up a congested district within and in the 
vicinity of Pittsburgh requiring the' shipping of between 80 and 90 
per cent of all the iron ore used in the manufacture of steel at Pitts- 
burgh from the iron mines adjacent to Duluth over a distance of prac- 
tically 1,000 miles and the shipping back of the manufactured steel 
product from Pittsburgh to Duluth and the territory tributary to 
Duluth over a distance of from 1,000 to 2,000 miles, thus producing 
unnecessary transportation charges from this region to Pittsburgh 
and return and causing loss on ail farm products raised within the 
territory tributary to Duluth on account of the .shipment of such 
products to supply the inhabitants of congested districts around 
Pittsburgh when such supplies, if the natural laws of trade were 
not thAvarted by the acts of respondents, would in ever-increasing 
quantities be sold and delivered to men employed in manufactories 
which would spring up in the territory tributary to Duluth. 

This intervener states that wherever the name Pittsburgh appears 
lierein without any designation of State thereafter, the same is in- 
tended to be Pittsburgh, Pa. ; that wherever the city of Duluth appears 
herein without the name of a State appended, Duluth, Minn., is 
intended; that wherever the name Chicago appears herein without 
the designation of State, Chicago, 111., is intended. 

Further claiming, this intervener asserts that there should be a 
base price established f. o. b. the mills of the United States Steel 
Corporation in Duluth and that such base price so to be established 
at such mills be on a parity with that of Pittsburgh and no less favor- 
ably to the consumers in Duluth and Minnesota. 

The Joint Committee of Civic Organizations of Duluth, this inter- 
vener, respectfully urges that your honorable Commission institute 
a proceeding in respect to the violation of the laws to which refer- 
ence is herein made to the end that the people of Duluth and the 
State of Minnesota may receive justice and enjoy the fullest benefits 
economically possible of their natural resources and favorable situa- 
tion ; that this committee be advised as to all proceedings taken there- 



51 

tinder ; and that it be permitted upon due notice to introduce evidence, 
file briefs, make oral arguments, or otherwise participate in the hear- 
ings that may be held by said Trade Commission by its representa- 
tives and attorneys, as it may be desired. 
Respectfully submitted. 

Joint Committee or Civic Organizations of Duluth, 
By Chas. p. Craig, Chairman. 
Jaqtxes & Hudson, 

Attorneys for Joint Committee of 

Civic Organizations of Duluth. 
Theodore T. Hudson, of Counsel. 



APPLICATION OF THE SOUTHERN ASSOCIATION OF STEEL FABRICATORS. 



[The application of the Southern Association of Steel Fabricators for a complaint against 
the United States Steel Corporation and other iron and steel producers.] 

To the Federal Trade Commission, 

Washington, D. C: 

1. The Southern Association of Steel Fabricators is a vohmtary 

association of fabricators of steel, whose address is 87^2 South 
Forsyth Street, Atlanta, Ga. 

2. This application is for a complaint to be issued by this Com- 
mission against the following parties : The United States Steel Cor- 
poration, 71 Broadway, New York City; The Tennessee Coal, Iron 
& Railroad Co., Birmingliam, Ala. ; The Republic Iron & Steel Co., 
Birmingham, Ala.; The Gulf States Steel Co., Birmingham, Ala.; 
The Knoxville Iron Co., Knoxville, Tenn. ; and all other steel pro- 
ducers situated or engaged in interstate commerce, in the South- 
eastern States. 

3. The respondents herein have been and are using unfair methods 
of competition in interstate commerce in violation of section 5 of the 
act of September 26, 1913 [(?) 1914], commonly laiown as the Fed- 
eral Trade Cormnission Act. They have been and still are discrimi- 
nating in price between different jjurchasers of steel sold for use 
within the United States, and the effect of such discrimination has 
been to substantially lessen competition in such commodities in vio- 
lation of section 2 of the act of October 15, 1914, commonly known as 
the Clayton Act. They have been and now are guilty of unlawful 
restraint of trade, contrary to the provisions of the antitrust acts. 

4. The several violations of law herein charged have been to the 
injury of the members of petitioner and to the injury of the fabri- 
cators and manufacturers of steel products throughout the Southern 
States. 

6. The respondents herein have been and now are engaged in the 
production and sale in interstate commerce of rolled, semifinished, 
and finished steel, including plates, shapes, sheets, bars, wire, cotton 
ties, barrel hoops, and other products. The applicant submits that 
the normal and reasonable price of such products should include the 
cost of production, with the addition of a reasonable profit, but with- 
out the addition of a large and arbitrary increase under the guise 
of a fictitious freight rate or otherwise. 

(52) 



53 

6. The three basic elements in the production of iron and steel are 
iron ore, coal, and limestone. All three of these elements are found 
together in the Birmingham district, a condition making for low 
cost production which exists nowhere else in the United States. The 
respondents situated in the Birmingham district can and do produce 
steel and iron as cheaply as the producers in Pittsburgh district or 
elsewhere. If basing points are sound and are to be continued, then 
Birmingham has the same right to be named a basing point as has 
Pittsburgh, and the prices charged throughout the South should in- 
clude only the freight rate from Birmingham and not the freight 
rate from Pittsburgh. 

7. The southern territory in which the factories of the members of 
the applicant's association are situated is tributary to the mills lo- 
cated at and near Birmingham. Yet the respondents and all other 
steel producers engaged in interstate commerce, no matter where 
located, sell their products for the Pittsburgh base price plus the 
amount of the freight from Pittsburgh to the purchaser. The basis 
of charge is the same regardless of the location of the purchaser; 
in other words, the price of steel is increased by a large fictitious 
freight rate which is not incurred or paid and is not a proper ele- 
ment in the price of the commodity. 

8. By reason of this, competition in steel is not only lessened but 
stifled, the cost of steel is increased by an arbitrary and unAvarranted 
amount, and buyers and manufacturers situated in and near Pitts- 
burgh receive preference and protection and those farther away are 
discriminated against unfairly and unreasonably. 

9. To demonstrate the stifling of competition, applicant shows that 
the gross price to purchasers of steel is exactly the same whether 
petitioners buy in Pittsburgh, in Chicago, in Birmingham, or any 
other place. 

10. By way of illustrating the arbitrary and unreasonable increase, 
applicant shows that on certain grades of steel the freight rate from 
Pittsburgh to Atlanta is 50 cents per 100 pounds, while from Bir- 
mingham to Atlanta it is only 19 cents. This difference of 31 cents 
in freight, or $6.20 per ton, is arbitrarily added to the price of ship- 
ments from Birmingham and is pocketed by the Birmingham pro- 
ducers. On many grades of steel the amount so pocketed is much 
larger. 

11. By way of illustrating the discrimination, applicant shows 
that some of the largest and strongest competitors of the manufac- 
turers belonging to applicant's association are situated in Pennsyl- 
vania, Ohio, Indiana, Kentucky, and other States close to Pittsburgh. 
The freight rates from Pittsburgh to the points in the States named 
are much lower than the freight rate from Pittsburgh to Atlanta, 



54 

though it is not as low as the freight rate from Birmingham to At- 
lanta. Applicant's members, however, are compelled to pay the 
freight rate, Pittsburgh- Atlanta, on steel produced in Birmingham 
while their competitors are paying the lower rate charged from 
Pittsburgh to their plants. This discrimination in price is substan- 
tial and seriously hampers the business of the manufacturers of the 
Southeast. It excludes entirely the southeastern manufacturers 
from some markets which they could otherwise reach, and it amounts 
to an arbitrary and unreasonable preference and protection given 
to the regions closer to Pittsburgh at the expense of the rest of the 
country, and more especially at the expense of the Southeast. 

12. These practices of the respondents are not due to natural 
causes nor are they based on different grades or quantities or quali- 
ties of the commodities sold. They are made by agreement and un- 
derstanding amounting to agreement between respondents and the 
other producers of steel to maintain such uniform, unreasonable, and 
discriminatory prices. 

Wherefore, applicant respectfully asks that this Commission in- 
A'estigate the matter complained of, and if upon investigation the 
Commission has reason to believe there is a violation of which the 
Commission has jurisdiction, that a complaint be issued against 
respondents, and such further proceedings be had as to the Com- 
mission may seem meet and proper. 

Applicant further asks that this application be consolidated T\ith 
the application heretofore filed by the Western Association of Eolled 
Steel Consumers for a complaint against the United States Steel 
Corporation and others, and that the complaints issued under the 
two applications be heard together. 

Ilespectfully submitted. 

Southern Association of Steel, Fabricators, 
By Weltnee & Cheatham, 

Attorneys, 412 Peters Building, Atlanta, Ga, 



APPLICATION OF THE BIRMINGHAM CIVIC ASSOCIATION AND THE BIRMINGHAM 

STEEL BASE BUREAU. 



[The application of tlie Birmingham Civic Association and the Birmingham Steel Base 
Bureau, a voluntary association, for a complaint against the United States Steel Cor- 
poration and its subsidiary, the Tennessee Coal, Iron & Railroad Co., and the Gulf 
States Steel Co.] 

To tlie Federal Trade Commission, 

Washington, D. C.i 

The Birmingham Civic Association, organized under the hiws of 
the State of Alabama as a corporation, and having as its address the 
tAventy-fifth, twenty-sixth, and tAventy-seventh floors of the Jefferson 
County Bank Building in the city of Birmingham, Ala., and the 
Birmingham Steel Base Bui-eau respectfully make application to 
the Federal Trade Commission to institute a proceeding upon the 
allegations hereinafter made and to issue a complaint directed 
against the United States Steel Corporation, a corporation organ- 
ized under the laws of the State of New Jersey, having its principal 
offices and address at 71 Broadway, in the city of New York, and its 
subsidiarj' corporations, viz, the Tennessee Coal, Iron & Kailroad 
Co. and the American Steel & Wire Co., whose respective addresses 
are No. 71 Broadway, New York City; and against the Gulf States 
Steel Co., a corporation, whose principal offices are in the Brown 
Marx Building in the city of Birmingham, Ala., on the grounds of 
unlawful restraint of trade and of price discrimination, contrary to 
the provisions of the antitrust acts, and in particular of section 2 of 
what is known as the Clayton antitrust act of October 15, 1914; and 
of unfair competition in trade, contrary to the provisions of section 
3 of the Federal Trade Commission act of September 26, 1914, to 
the prej udice and injury of numerous manufacturers and fabricators 
that are users of steel and are members of the petitioners' organiza- 
tions and to the prejudice and injuiy of hundreds of individuals 
who are members of petitioners' organizations and thousands of 
individuals not members of petitioners' organizations but who are 
ultimate consumers of the various forms of finished products made 
from rolled steel and located in what is laiown as southern territory 
or in all localities of the United States to which the freig'ht rates on 
steel and finished or semifinished steel products from the Pittsburgh 
district are higher than the freight rates from what is known as the 
Birmingham district to such localities. 

The petitioners' organizations are composed of upward of 2,000 
individuals, firms, and corporations engaged in business in and about 

(55) 



56 

Birmingliam, Ala., some in the fabrication of steel products for sale 
in interstate commerce, and of firms and corporations doing business 
in the States of Mississippi, Louisiana, Florida, Georgia, Texas, and 
South Carolina as manufacturers using rolled steel as part of their 
raw materials, and for the puri^oses of this application petitioners 
also represent the Chamber of Commerce of Columbia, S. C, the 
Tampa (Fla.) Board of Trade, and the Farmers' Protective League 
of Alabama. 

The United States Steel Corporation, respondent, through its sub- 
sidiary companies, which it owns and controls, viz, the Tennessee 
Coal, Iron & Kailroad Co., and the American Steel & Wire Co. are 
and have been for a long time engaged in the production and sale 
in interstate commerce of steel billets and rolled steel, including 
plates, shapes, bars, wire, and other products of their rolling mills and 
semifinishing plants located at or near Ensley, Ala., Bessemer, Ala., 
and Fairfield, Ala., and said United States Steel Corporation through 
its subsidiaries is and has been for several years engaged in the pro- 
duction and sale of such rolled-steel products in interstate commerce 
from plants located in the Pittsburgh, Pa., and other eastern districts. 

The Gulf States Steel Co., respondent, is engaged in the produc- 
tion and sale in interstate commerce of various forms of rolled steel, 
including bars, nails, fencing, and Avire materials, its plant being 
located at or near Alabama City, Ala., situated about 50 miles from 
Birmingham, Ala. 

The steel billets and rolled steel, including the various forms of 
Avire material made in the Birmingham district by the respondent 
United States Steel Corporation and through its said subsidiary at 
the plants in Ensley, Bessemer, and Fairfield, Ala., are produced at a 
materially lower cost than the like products are produced by its 
other subsidiary companies and by the so-called independent steel 
companies in the Pittsburgh or eastern districts. The said plants at 
Enslej^, Bessemer, and Fairfield, Ala., are situated, respectively, about 
6, 11, and 5 miles from the center of the city of Birmingham, and 
that among the factors making for the said loAver cost of steel produc- 
tion in said Birmingham district is the proximity of the iron ores, 
coal, and limestone, the three essential raw materials, all of which 
are within a radius of not exceeding 25 miles of one another and in 
most instances much nearer together in said district. . 

Steel production in said Birmingham district and at Alabama 
City, Ala., has been on the increase during several years past, and 
recent demand has caused the construction at Fairfield, Ala., of a 
large rolling mill, a large blooming mill, and a large fabricating 
plant by the United States Steel Corporation through the sub- 
sidiary, the Temiessee Coal, Iron & Railroad Co., this in addition to 



57 

the facilities of the same corporation consecutively built by it at 
Ensley and Bessemer in the form of a modern steel production plant 
and rail mill at Ensley and a rolling mill at Bessemer. The said 
plants at Fairfield have been completed during the year 1919. 

Applicants respectfully submit that the fair and reasonable price 
for steel billets and rolled steel should be determined, if open com- 
petition existed, by the cost of production plus a reasonable profit, 
without the addition of any substantial and arbitrary increase, which 
forms no part of the cost of production, but is over and above such 
reasonable profit. The territory wherein are situated the factories 
of petitioners' members and their plants, as well as the thousands of 
ultimate consumers represented by petitioners in this application, 
should be normally and naturally tributary to the location of the 
mills at Bessemer, Alabama City, Ensley, and Fairfield, where steel 
is produced at the lowest cost and where and to and from which the 
greatest and shortest facilities for transportation from mill to con- 
sumer are and will continue to be furnished. 

Applicants are informed and believe and therefore state that the 
United States Steel Corporation, through its subsidiary, the Ten- 
nessee Coal, Iron & Eailroad Co., owns and controls upward of 
700,000,000 tons of iron ore and 2,000,000,000 tons of coal, situated 
practically all in what is known as the Birmingham district; that 
approximately one-half of said coal supply is of a superior coking 
quality; and said iron ore is largely of a self -fluxing quality, ana- 
lyzing approximately 38 per cent metallic iron, and said ore is well 
suited to the manufacture of basic pig iron for use in the production 
of basic open-hearth steel. 

If the principle is accepted of fixing the price of rolled steel in 
accordance with the law of supply and demand and by determining 
the cost plus a reasonable profit, then the price of rolled steel and 
billets f. o. b. mills in the Birmingham district should be as low 
and not higher than the price at mills in any other district in the 
United States, because, as hereinbefore stated, the cost of steel pro- 
duction in the Birmingham district is as low as at any other point 
or points in the United States. And the fixing of any higher price 
in said district than is fixed elsewhere is arbitrary, artificial, and un- 
economical and gives to respondent producers excessive and unrea- 
sonable profits. 

If basing points for steel price-making be deemed sound in prin- 
ciple and practice, in the interest of economy of trade, both to 
producers and consumers in the several districts or sections to be 
served, the selection of such basing points should take into consid- 
eration the cost of production at such points and the natural right 
of consumers in such districts or sections to purchase their steel 
requirements at prices related to their distance from such basing 



58 , V 

points. And the Commission should further consider in -this con- 
nection that the fixing of a fair and reasonable mill price for rolled 
steel and billets at Birmingham as one of such proposed basing 
points would naturally attract to the sections tributary ■ thereto 
numerous fabricating plants or large users of such steel for distri- 
bution to consumers who are and will be located i» said sections, 
thus by normal processes of trade creating materially greater de- 
mand for such steel in the Birmingham distriet. than now appears 
by reason of the single base at Pittsburgh, as hereinafter described. 

Applicants further submit that in any proper^onsideration of the 
question of more than one basing point, in addition to the economic 
reasons above set forth, Birmingham best answers all the require- 
ments and conditions of a basing point because of its long distance 
from Pittsburgh, viz., approxim-atel}' 800 miles by rail. ''' 

In support of this application your petitioners submit the fol- 
lowing facts as constituting the violations of law complained of : 

1. That said United States Steel Corporation and its subsidiaries, 
the Tennessee Coal, Iron & Railroad Co. and the American Steel &. 
Wire Co., acting under its control and direction, and the said Gulf 
States Steel Co., upon sales in interstate commerce for use, con- 
sumption, or resale within the United States, are and have for sev- 
eral years past been charging to members of the petitioner associa- 
tion and to other purchasers in the States mentioned in the second 
paragraph hereof, for rolled steel consisting of steel plates, shapes, 
bars, wire, and other rolled steel products of their respective mills 
which are by them rolled and manufactured and delivered at or 
shipped from their said respective rolling mills or plants situated 
at Bessemer, Fairfield, and Alabama City (said Gulf States Steel 
Co., however, does not roll plates or shapes, as applicants are in- 
formed), at a price which is fixed by adding to the prevailing prices 
f. o. b. mills Pittsburgh the amount of the railroad freight charges 
or cost of transporting such commodities from Pittsburgh, Pa., to 
any destination (other than Birmingham) where they are to be 
received by the purchasers, respectively, less the freight charges 
from the plants of such producers to such destination, as if such 
commodities were in fact shipped from Pittsburgh instead of being 
shipped from their respective mills at Bessemer, Fairfield, and Ala- 
bama City, as the fact is, and notwithstanding steel is produced in 
the Birmingham district at materially less cost than in the Pitts- 
burgh district. In other words, the prices of such commodities are 
increased by large and unwarranted profits and large and fictitious 
freight rates, which amount to variously from $3 to about $11 per 
ton, and which are not incurred or paid and are no proper element 
or part of the price of such commodities but are an arbitrary, 



59 

excessive, and unreasonable addition thereto. To purchasers who 
are fabricators situated in Birmingham proper, applicants are in- 
formed, and on such information say, that for plates, shapes, and 
bars respondents charge prices f. o. b. mills the same as Pittsburgh 
mill prices, with an arbitrary addition of $3 per net ton. However, 
as the result of the single-base system herein described, the price on 
all finished steel products manufactured by respondents in their 
mills or plants located at said points in Alabama as paid by the 
ultimate consumer is the same as if said products were shipped from 
Pittsburgh all the way to any point or points in the Birmingham 
district or in the southern territory tributary thereto, although in 
reality they are shipped from the said mills or plants in Alabama. 

2. That many of your complainants, members of the petitioner 
associations, are competitors in business in interstate commerce of 
other fabricators in what is known as the Pittsburgh district or at 
points nearer Pittsburgh than Birmingham who have been during 
the same period and are also purchasers in interstate commerce from 
respondent United States Steel Corporation of like commodities, and 
to such competitors the said respondent has been and is selling such 
commodities at prices substantially less than the said prices by it 
exacted from and paid by the members of the applicant associations 
as aforesaid. • 

3. That the respondent United States Steel Corporation during 
said period has been and is selling such commodities to such com- 
petitors at Pittsburgh and in the Pittsburgh district of the com- 
plaining members of the applicant associations f. o. b. Pittsburgh 
and at prices less by the amounts of the ruling freight charges on 
like commodities from Pittsburgh to Birmingham, or by a substan- 
tial portion of that sum, than the prices so made to members of the 
applicant associations or other fabricators or consumers located in 
the Birmingham district or in the territory tributary thereto, foi- 
like commodities produced at Ensley, Bessemer, and Fairfield. 

4. The respective respondents engaged in interstate commerce 
thus, as applicants charge, discriminate in price of such commodities 
(which commodities are so sold for use, consumption, or resale within 
the United States) in favor of such competitors of members of the 
applicant associations who are located in the Pittsburgh district or 
in the teri-itory tributary thereto and against the members of appli- 
cants and other consumers of rolled steel products located in the 
Birmingham district or in the territory tributary thereto. 

5. The effect of such discrimination in price is to cause to and 
impose upon the fabricator members of applicants with respect to 
sales or attempted sales by them of their products to customers in 
the Pittsburgh district, or in the territory north or east of said 



60 

Birmingham district, the great cost or sum amounting to the excess 
of the freight rates from Pittsburgh over the freigiit rates from 
Birmingham to the respective locations of factories operated by ap- 
plicants' members or other fabricators in what is known as the 
southern territory, in addition to the cost of transportation of their 
own product from their plants to customers in the Pittsburgh dis- 
trict or territory tributary thereto as aforesaid, and thereby prac- 
tically to exclude them from such trade in competition with fabrica- 
tors located in said Pittsburgh or eastern district or territory, while 
but for such discrimination in price they could and would success- 
fully compete with such eastern competitors for and receive and en- 
joy profitable trade in such territory north and east of said Birming- 
ham district, particularly in that portion thereof lying nearer or as 
near to Birmingham as to Pittsburgh, or whereto the freight charges 
on such commodities from Pittsburgh and Binningham are approxi- 
mately the same, and from which intermediate territory applicants' 
fabricator members are now so practically excluded. 

6. The further effect of such discrimination in price (while so 
practically excluding complainants, fabricator members of appli- 
cants from such eastern and intermediate markets) is to enable and 
permit their said eastern competitors (purchasing such commodities 
from the respondent the United States Steel Corporation or its sub- 
sidiaries f. o. b. Pittsburgh and at such lower price than members of 
the applicants can purchase, as aforesaid) to ship and deliver theii' 
products to purchasers thereof in the district tributai'y to Birming- 
ham at a cost or expense lower than or practically as low as said 
members of the applicants can or could ship and deliver their prod- 
ucts to such purchasers, and so to compete on equal terms with such 
members of applicant associations for the trade in the territory of 
such members. 

Therefore the applicants charge that the fact that such Birming- 
ham district fabricators of steel are obliged to pay for rolled steel 
purchased of the respective respondents and produced at their mills 
or plants in said Birmingham or Alabama district in accordance with 
this single-base system, i. e., a price equal to the Pittsburgh base 
price of the commodity plus a sum equal to the freight charge per 
ton (or a substantial portion thereof), from Pittsburgh to the point 
of destination (although, in fact, no such freight charge is actually 
incurred), deprives such consumers of rolled steel in the Birmingham 
district and territory tributary thereto from enjoying the advantage 
to which they are entitled by reason of their proximity to the low-cost 
producing plant at Ensley and elsewhere in the Birmingham district, 
and arbitrarily and im justly discriminates against such consumers in 
said Birmingham district 9nd the territory tributary thereto in so 



61 

excluding them from competing for business with those fabricators 
who are in or tributary to the Pittsburgh district and the East and 
in enabling such eastern fabricators at the same time to compete on 
unfairly advantageous terms in trade with the fabricators in the Bir- 
mingham district as if the plants of such eastern fabricators were 
in the Birmingham district or in the territory tributary thereto. 

7. The discrimination in price and disad^-antage so suffered by the 
fabricators and consumers of rolled steel in the Birmingham district 
and territory tributarj^ thereto is not a natural one and is not due to 
their geographical location or remoteness from adequate sources of 
supply. Under the play of the natural and normal forces governing 
supply and demand (which has already led to the development of the 
steel industry there) and with the removal of the artificial barriers 
in the form of the discriminations herein complained of, the supply 
in such Birmingham or Alabama district of rolled steel and rolled 
steel products will accommodate itself to and meet the demands 
therefor. 

8. Such increase in cost of rolled steel increases the cost and selling 
price of everything involving its use, and not only the fabricators in 
the Birmingham district and territory tributary thereto, but their 
customers and all people vv'ho consume or xise the products of steel in 
that section of. the country, are wrongful!}' and prejudicially affected 
by this compulsory increase in price of the products they purchase 
caused by such artificial increase in price of rolled steel; every 
farmer buying fence wire, every home builder buying nails, every 
city or county constructing its schoolhouses or bridges, must pay this 
excessive price, and the tenant of every building using structural 
steel or reinforcing bars must pay this economic tax in the last 
analysis, being so situated in said district of the South farther re- 
moved from Pittsburgh than from Birmingham and notwithstanding 
steel is produced cheaper in said Birmingham district than in the 
Pittsburgh district; and such discrimination in price is against and 
unfair and unjust and prejudicial to the general commercial interests 
of such territory constituting the Birmingham district in favor of 
such Pittsburgh or eastern district. 

9. To meet the said Pittsburgh base price, the respondents who have 
mills in the Birmingham district make prices and sell to purchasers 
in the Pittsburgh district or in territory nearer Pittsburgh than Bir- 
mingham, who are competitors of fabricator members of applicants, 
at prices of the Pittsburgh mills and themselves absorb the freight 
rates from their mills to the purchasers' plants, and thus discriminate 
in price to the amount of several dollars per net ton in favor of such 
competitors and against applicants' said members. 

10. The respondents having mills at Fairfield, Ensley, and Besse- 
mer do not in all cases or uniformly maintain or charge such Pitts- 



62 

burgh base price, but have practiced and made and do make other 
discriminations in price in favor of certain customers in the Birming- 
ham district, viz : They have quoted and made and do quote and make 
prices to railroad companies for rails, angle bars, and tie plates and 
other steel railroad equipment f. o. b. Birmingham or Pittsburgh or 
f. o. b. mill. The said Tennessee Coal, Iron & Railroad Co. quotes 
and sells pig iron at practically the same price f. o. b. Birmingham 
and Pittsburgh. And applicants submit that such practices, besides 
constituting discriminations in price, as aforesaid, show that such 
price fixing f. o. b. Pittsburgh solely has no trade or economic foun- 
dation. 

11. The effect of the discriminations in price, as aforesaid, may be 
and is to substantially diminish competition and tends to create a 
monopoly in the said line of commerce if, indeed, such monopoly does 
not already exist to all intents and purposes in the domestic trade 
of the United States. 

12. Said discriminations in price between purchasers of such com- 
raodities are not on account of differences in the grade, quality, or 
quantity of the commodity sold and do not make only due allowance 
for difference in the cost of selling or transportation, nor are such 
discriminations made in good faith to meet competition but are made 
by agreement or understanding tantamount to agreement between 
respondents or between respondents and other producers of steel in 
order to maintain prices of rolled steel and particularly to maintain 
prices of rolled steel and finished and semifinished steel products 
and to maintain such increased and unreasonable prices in and 
throughout said Birmingham district to the members of the appli- 
cants and other consumers in said district and territorj- tributary 
thereto. 

13. The applicants charge and submit that the respective respond- 
ents above named, the United States Steel Corporation, the Tennes- 
see Coal, Iron & Eailroad Co., and the Gulf States Steel Co., in the 
course of their said commerce in the acts and respects hereinabove 
set forth, have discriminated and are discriminating in price between 
different purchasers of commodities, which commodities are sold for 
use, consumption, or resale within the United States where the effect 
of such discriminations may be to substantially lessen competition 
or tend to create a monopoly in the line of commerce hereinbefore 
mentioned. 

14. The applicants further charge and submit that the acts of re- 
spondents set forth above and complained of use, cause, and bring 
about and constitute unfair methods of competition in commerce, 
which are declared to be unlawful by section 5 of the said Federal 
Trade Commission Act. 



63 

Petitioners therefore respectfully ask that by reason of the fore- 
going facts disclosing acts and conditions set forth in this applica- 
tion of unlawful discriminations in price and of unfair methods of 
competition in commerce, this Commission investigate the matter 
complained of, and if on such investigation the Commission has rea- 
son to believe that there is a violation of the law over which it has 
jurisdiction, that a complaint be issued against the respondents, or 
any of them, and such further proceedings be had as the law requires 
or contemplates and to the Commission shall seem meet. 

Respectfully submitted. 

Birmingham Civic Association, 
By E. B. Irwin, President. 

C. L. Harold, Secretary -Manager. 
Birmingham Steel Base Bureau, 
By G. E. Harsh, Chairman. 



ANSWERS. 



. ANSWER OF THE UNITED STATES STEEL CORPORATION, ETC. 

[In the matter of the application of the Western Association of Rolled Steel Consumers 
for a complaint against the United States Steel Corporation and others. — Answer of 
the United States Steel Corporation, Carnegie Steel Co., Illinois Steel Co., and 
Minnesota Steel Co.] 

Before the Federal Trade Commission. 

The United States Steel Corpoi'ation, Carnegie Steel Co., lUnois 
Steel Co., and Minnesota Steel Co., appearing by leave of the Federal 
Trade Commission, and responding to the application of the Western 
Association of Rolled Steel Consumers for a complaint against them 
and others, say : 

1. Respondent, United States Steel Corporation, is not now and 
never has been engaged in the production or sale of rolled iron and 
steel at Gary, in the State of Indiana, or South Chicago or Joliet, in 
the State of Illinois; or Milwaukee, in the State of Wisconsin; or 
Duluth, in the State of Minnesota; or Pittsburgh, in the State of 
Pennsylvania; or elsewhere, as stated in said application. United 
States Steel Corporation owns substantially all the stock of the Car- 
negie Steel Co., which produces and sells rolled iron and steel and 
other iron and steel products at Pittsburgh ; substantially all the stock 
of the Illinois Steel Co., which produces and sells rolled iron and 
steel and other iron and steel products at Joliet, South Chicago, 
Garj'', and Milwaukee ; and substantially all the stock of the Federal 
Steel Co., whose subsidiary, the Minnesota Steel Co., manufactures 
and sells rolled iron and steel and other iron and steel products at 
Duluth. United States Steel Corporation sustains no relation to 
any of said companies except as stockholder as aforesaid, although 
it does from time to time make recommendations to said manufac- 
turing companies with respect to the conduct of their several busi- 
nesses and exercises such control over them as is incident to such 
stock ownership. 

2. Respondents, Illinois Steel Co. and Minnesota Steel Co., gener- 
ally sell their products of iron and steel at the prices charged 
for similar products in tlie Pittsburgh district for delivery at 
the Pittsburgh mills, plus an amount equal to the freight on such 
products from Pittsburgh to the point of destination. This is 
the practice of steel manufacturers generally. The prices so charged 
are not arbitrary nor are they the result of any agreement or 

(64) 



65 

r 

understanding between producers. On the contrary, tliey are fixed j 
and controlled by the law of supply and demand and are the mar- 
ket prices prevailing in the territory served at the time of service. 
Said practice had its inception at the beginning of the steel in- 
dustry in this country. At that time nearly all the iron and 
steel produced in the United States was manufactured in the Pitts- 
burgh district and the Pittsburgh mills controlled the price as a mat- 
ter of course. Since that time many mills have been established in 
different parts of the country outside of the Pittsburgh district, 
largely in what is known as the Chicago district. Such mills, how- 
ever, have iiever been able to supply the reqairements of the territory 
tributary thereto, the major part thereof having always been supplied 
by the Pittsburgh mills. As a consequence consumers within such 
territory have been obliged to depend upon tho manufacturers in the 
Pittsburgh district for the larger part of their supplies, and for this 
reason the practice of selling at the prices charged by the Pittsburgh 
manufacturers plus freight from Pittsburgh has been continued 
down to the present time. 

3. The practice of selling at the Pittsburgh base price plus freight 
has not, however, been adhered to at all times or under all circum- 
stances. When the demand has equaled or exceeded the supply it 
has generally been followed, but when the demand has lessened and 
the supply has materially exceeded the demand, and particularly 
when the production in the districts outside of Pittsburgh has equaled 
or exceeded the requirements of such districts, little attention has 
been paid to the Pittsburgh price, and the freight charged from Pitts- 
burgh has either been omitted altogether or gi'eatly reduced, follow- 
ing again the law of supply and demand in the territory served. 

4. The practice above described long since became and still remains 
a settled custom in the trade. The business of producers and con- 
sumers have been arranged, manufacturing and fabricating plants 
have been located, and vast investments of capital have been made in 
reliance upon it. To change such practice by order of the Commis- 
sion or in any other way than by the ordinary processes of trade 
WQuld create great confusion in the industry and cause incalculable 
loss to a large number of concerns engaged in the business, and, 
respondents submit, should not be attempted. 

5. Respondents further submit that the detennination as to 
whether Chicago shall be a basing point in fixing the manufacturers' 
price for iron and steel would necessarily involve the determination 
of the price at which such manufacturers shall sell their products, 
and that such determination is beyond the powers conferred upon the 
Federal Trade Commission by law. To merely order that the Chi- 
cago manufacturers shall sell such materials as they manufacture at 

139378—19 5 



66 

a Chicago base price without fixing such price would but require a 
change in the name by which the transaction is described without 
affecting in any way the substance tliereof. 

6. Respondents further submit that Chicago could not properly 
be made a basing point for the sale of iron and steel under present 
conditions. Pittsburgh is and will continue to be the basing point 
for such products in the sense that it controls and will continue to 
control the price of iron and steel throughout the country so long as 
the country is dependent upon it for a substantial portion of its 
supply. It may be, as claimed in said application, that the greatest 
normal growth and increase in iron and steel production under peace 
conditions will naturally and normally be in and about Chicago, and 
it may be that at some future time the Chicago district will lead in 
the production of iron and steel in this countr3^ When that time 
arrives, if it ever does arrive, the primacy will pass to Chicago, and 
it will become the basing point without the order of any legislature 
or commission and without the power of any person to prevent it. 
Until that time and so long as Chicago is only able to manufacture 
less than half of what it consumes, it is idle, respondents submit, 
and contrary to all economic laws to insist that it shall be made a 
basing point. Chicago producers can not be expected, nor should 
they be required, to sell their products in any locality at less than the 
market price prevailing in such locality, or at a substantially less 
J) rice than their customers in such locality are obliged to pay to other 
producers for the major part of their requirements. 

7. Respondent, United States Steel Corporation, denies that it 
discriminates between the purchasers of iron and steel in the Pitts- 
burgh and Chicago districts within the meaning of section 2 of the 
Clayton Act. Assuming (although such is not the fact) that it sells 
in the Pittsburgh district what is there sold by the Carnegie Steel 
Co., and in the Chicago district what is there sold by the Illinois 
Steel Co., it says that such sales are made in each district to pur- 
chasers of the same class at the same price and are made in each 
district at the market prices there prevailing. Iron and steel are 
sold generally to the manufacturers of agricultural implements, and 
steel rails and accessories are sold to the railroads on a different basis 
and, in the case of some articles, at a lower price than to other con- 
sumers. The users of such steel, however, are not in competition with 
any other class of users, and the practice neither lessens competition 
nor tends to create a monopoly in any line of commerce. 

8. Respondents deny that the charging of a greater price for 
steel products in the Chicago district than is charged for like prod- 
ucts in the Pittsburgh district under the circumstances above set 
forth amounts to unfair trading within the meaning of the fifth sec- 
tion of the Federal Trade Commission Act. The unfair trading pro- 



67 

hibited in that section is such as tends to the injury of competitors, 
not customers, and it is not suggested that the practice complained 
of is of that character. Moreover, such practice operates to the 
benefit of the consumers of steel, without regard to their location, as 
it gives them the benefit of the competition of the manufacturers 
of the whole country, whereas if the course insisted upon by the 
applicants should be adopted competition between localities would 
to a large extent, af not altogether, be dest}-oyed. Nor is the claim 
that the Chicago fabricators are prevented by the practice in ques- 
tion from competing with the Pittsburgh fabricators in the latter's 
tei'ritorj' a substantial one. The fabricating business is essentially 
local in character on account of the high freight rate on fabricated 
material because of its bulk. The Chicago fabricators therefore could 
not successfully compete with the Pittsburgh fabricators in the 
latter's territory, even if the cost of rolled steel was the same in each 
locality. 

9. While respondents concede the jurisdiction of the Commission 
to determine any question of discrimination arising under the second 
section of the Clayton Act and any question of unfair methods of 
competition arising under the fifth section of the Federal Trade Com- 
mission Act, they deny the jurisdiction of the Commission to fix 
the prices at which steel products shall be sold or to determine 
whether Pittsburgli, Chicago, or any other point shall be a basing 
point upon which such prices shall be made. As to the allegations 
of discrimination and unfair methods of competition, respondents 
submit that the practices hereinbefore described do not involve 
either, and do not tend to substantially lessen competition or to create 
a monopoly in any line of commerce. 

10. Eespondents respectfully submit that the application for a 
complaint should be denied. 

Dated August 19, 1919. 

United States Steel Corporation', 
By Elbert H. Gary, Chairmo/n.. 

Carnegie Steel Co., 
By H. D. Williams, President. 

Illinois Steel Co., 
By E. J. BuEFiNGTON, President. 

Minnesota Steel Co., 
By Elbert H. Gary, President. 

William W. Corlett, 

Attwney for Respondents, 



71 Broadway, New York. 



R. V. LiNDABURY, 

Of Counsel. 



68 

ANSWER OF THE STEEL & TUBE CO. OF AMERICA. 

[In the matter of the application by the Western Association of Rolled Steel Consumers 
for a complaint against the United States Steel Corporation and its subsidiary com- 
panies, and the Inland Steel Co., the Interstate Iron & Steel Co., and the Steel & Tub« 
Co. of America.] 

Befoke the Federal Trade Commission. 

[Application No. 9—1296.] 

STATEMENT OF POSITION OF THE STEEL & TUBE CO. OF AMERICA, 

1. As to the allegation of said application that the respondents 
are, and since on or about the 1st day of July, 1918, have been, 
charging the petitioner and other customers for steel and steel prod- 
ucts at prices fixed by the method stated in said application, this 
respondent sa5's that said method of fixing prices was not adopted on 
or about the date mentioned, but that it has been generally followed 
during practically the entire history of steel . production in this 
country, except duiing the period from September 24, 1917, to July 
1, 1918. As a war measure, the President of the United States on 
September 24, 1917, approved an agreement between the War Indus- 
tries Board and the steel manufacturers, which became immediately 
effective on that date, whereby the prices for steel bars, shapes, and 
plates were fixed with Pittsburgh and Chicago as bases. That agree- 
ment, subject to certain modifications, was continued in force by 
orders entered from time to time by the War Industries Board, with 
the approval of the President, and on June 21, 1918, the War Indus- 
tries Board announced that the President had approved an agreement 
with the representatives of the iron ore, pig iron, and steel interests 
that the maximum prices then prevailing on steel products should 
continue in effect for a period therein specified, subject to two excep- 
tions, one of which was as follows : " On and after Jn\j 1, 1918, the 
basing point for steel bars, shapes, and plates shall be Pittsburgh, 
Pa." Thereupon the steel manufacturers returned to the method 
generally prevailing prior to such war measures. 

2. The said method of fixi.ig prices is not the result of any agree-* 
ment, or of any understanding amounting to agreement, between this 
respondent .and other producers of steel, in order to maintain prices 
of steel, either in the so-called Chicago district or elsewhere, or for 
any other purpose. No such understanding or agreement exists or 
has existed. The said method was and is a natural and necessary 
incident to competition in the steel industry. The steel industry 
practically had its origin in the PittvSburgh district, which at all times 
has produced and still does produce much the larger part of the 
steel made in the entire country and its product is sold throughout 
the country. The manufacturers of steel in the Chicago district, as 



69 

respondent is informed and believes, have in the past produced and 
do now produce much less than one-half of the steel required to 
meet the demands of consumers in that district. The larger part of 
the needs of consumers of steel in said district is supplied fx'om the 
Pittsburgh district, and as a necessary consequence the market price 
within the Chicago district is generally the Pittsburgh price with 
freight from Pittsburgh added. It is submitted that there can not be 
two market prices for steel products in the Chicago district, one 
applying to steel produced in that district and another to steel pro- 
duced in Pittsburgh and shipped into that district, and that so long 
as a large poition of the needs of that district must be supplied from 
the Pittsburgh district the market price will, through the natural 
operation of tlie laws of trade, be generally the price at which the 
Pittsburgh product is delivered in the Chicago district. 

While generally the prices in the Chicago district are based on 
Pittsburgh prices, the prices made by the mills in the Chicago dis- 
trict vary from time to time in accordance with the relation of the 
supply to the demand in that district. 

3. The use of the Pittsburgh base by steel manufacturers is but a 
method of arriving at the price at which the manufacturer will 
market his product, which is in conformity with, controlled by, and 
subject to the law of supply and demand. The establishing of Chi- 
cago as a basing point by the Commission, as is suggested in the ap- 
plication, would be an attempt arbitrarily to fix prices, in disregard 
of " the natural and normal forces governing supply and demand," 
to use the language of the application. It Avould have the necessary 
effect of lessening competition. But this respondent submits that it 
is not within the power of this Commission to fix prices to be ob- 
served by the manufacturers, either by establishing Chicago as a bas- 
ing point or hj any other methods. 

4. Paragraph 7 of the application alleges that if the use of the 
Pittsburgh base is abandoned " the supply in such Chicago district 
of rolled steel and rolled steel products will accommodate itself to 
and meet the demand therefor." It is not reasonable to assume that 
the development of the steel industry in Chicago will be stimulated 
by removing the advantage it now has, arising out of its proximity to 
its chief market. It would seem that the natural effect would be to 
check such development. But, however that may be, the implied ad- 
mission that the Chicago mills can not now supply the demands of 
the district makes it certain that the market price under present con- 
ditions in that district can only be determined by the operation of 
the law of supply and demand. 

5. The erection of steel plants in the Chicago district, involving 
investment of a large amount of capital, was in large measure due 
to the advantage gained by nearness to the market to be supplied. 



70 

It would be both unfair and uneconomic for this Commission, if it 
had the power to do so, which tliis respondent denies, to compel 
respondent and other manufacturers to forego this natural trade 
advantage. 

6. Eespondent denies that it has discriminated in prices between 
complaining members of the applicant association and their com- 
petitors in the Pittsburgh district, or in the States east of Indiana, 
where the effect of such discrimination has been, or might be,, to sub- 
stantially lessen competition or tend to create monopoly, or that it 
has discriminated between purchasers in any way contrary to the 
provisions of section 2 of the Clayton Act. 

7. Respondent denies that said method of fixing prices brings about 
or constitutes an unfair method of competition in commerce, which is 
declared to be unlawful by section 5 of the Federal Trade Commission 
Act. That section is intended to prevent the use of unfair practices 
or methods of competition between manufacturers or dealers in any 
line of commodities against each other, and the application contains 
no charge that any such methods or practices are or have been used by 
the respondent or other steel manufacturers. 

8. Much the major portion of the rolled steel products of the re- 
spondent is in the form of pipe and tubing. Eespondent is the only 
manufacturer of such pipe and tubing in the Chicago district. It 
supplies, however, but a small part of the pipe and tubing used and 
sold in said district, the larger portion thereof being furnished from 
the Pittsburgh district. The price at which it sells is and must be, 
therefore, the price made by manufacturers of the Pittsburgh district. 
It is therefore submitted that if this Commission has any power, 
which is denied, to require the sale of the pipe and tubing manufac- 
tured by respondent upon a Chicago base, such power should not be 
exercised to compel respondent to sell the comparatively small per- 
centage which it produces at a price less than that at which the major 
jDortion of the pipe and tubing sold in the Chicago district is mariieted. 

9. Respondent denies that it quotes or makes, or has quoted or 
made, prices to manufacturers of agricultural implements on any 
other basis than that used in sales to its customers generally. As to 
the allegation that it discriminates in favor of railroad companies in 
quotations for rails, angle bars, splice bars, and tie plates, respondent 
says it does not manufacture or sell any of the articles mentioned. 

10. It is submitted that no complaint should issue upon the appli- 
cation. 

The Steel and Tube Company of America, 
By Clayton Mark, Chairman. 

vScoTT, Bancroft, Martin & Stephens, 

Attorneys for The Steel c& Tnhe Co. of America, 

134 South La Salle Street, Chicago. 



ANSWER OP THE INLAND STEEL CO. 

[Statements submitted by Inland Steel Co. to the Federal Trade Commission at the 
suggestion of the commission in reply to the application of the Western Association 
of Rolled Steel Consumers for the institution of proceedings by the commission to pre- 
vent the use of a Pittsburgh base price in connection with the sale of iron and steel 
products.] 

[Application 9-3296, basing point for steel.] 

The Inland Steel Co. fully approves of the fact that this appli- 
cation has been made to the Federal Trade Commission and is quite 
willing to ignore any personal interest it may be supposed to have 
in the continuing of the present selling methods if the Government 
will carefully investigate the conditions and set its approval on 
such method as the Federal Trade Commission may decide to be fair 
and reasonable to both buyers and sellers. 

The Inland Steel Co. has no steel works east of the Chicago dis- 
trict and sells very little, if any, steel east of Indiana. Its natural 
market is west of Ohio, south to the Ohio River, and thence west 
to the Pacific coast. 

The Inland Steel Co. does not have and never has had access to 
the cost sheets of the subsidiary companies of the United States Steel 
Corporation and is, therefore, unable to state from knowledge what 
are the comparative costs of the production of steel in the plant of 
Carnegie Steel Co. or tlie Illinois Steel Co. 

The application apparently seeks to convey the impression that 
the main factor in the cost of steel is the freight rate upon iron ore. 
This is obviously misleading. In the production of pig iron the 
tonnage of coal and limestone involved in the process of conversion 
is approximately equal to the tonnage of ore, and in the production 
of steel the tonnage of coal alone employed in the process largely 
exceeds the tonnage of ore. The coal used in the manufacture of 
coke for pig iron by the Inland Steel Co. must be hauled to its plant 
from the Pennsylvania and West Virginia fields, and the steam 
coal obtained from Indiana and Illinois for heat-making purposes 
is more expensive in proportion to quality than is the coal of the 
Pittsburgh district. 

Much of the equipment, machinery, and supplies used in the 
manufacture of steel is produced in quantities only in the Pittsburgh 
district and have to be imported from that district by outside plants. 

Without attempting to discuss the details of the costs in the re- 
spective territories and without accurate knowledge on the subject, 
the Inland Steel Co. desires to express its conviction that production 
of steel by equal plants in the Pittsburgh and Chicago districts 
would show lower cost in the Pittsburgh district. 



72 

The industry was first established in the Pittsburgh district. 
Many of the large producers in the Pittsburgh district entrenched 
themselves by the acquirement at a comparatively early pei'iod of 
iron mines and other sources of raw material at a price lower than 
that at which similar sources couild be acquired when Chicago com- 
petitors entered the field. This more than offsets any advantage 
which the Chicago district steel makers enjoj^ in connection with 
transportation costs. 

The Inland Steel Co. emphatically denies all insinuations con- 
tained in the application to the effect that it is or has been a party 
to price fixing or that it is not engaged in active competition with 
other steel mills, including the subsidiaries of the United States 
Steel Corporation. 

The Inland Steel Co. is absolutely independent of all other con- 
cerns engaged in the same line of business and offers its products 
to its customers, quoting prices based upon its desire to obtain a 
reasonable profit and primarily governed by market conditions in 
the industry. 

When the Inland Steel Co. entei'ed upon its business career the 
Pittsburgh district was, as it still remains, by far the largest pro- 
ducer of steel products in the country. Pittsburgh competition was 
the controlling competition which plants located elsewhere were re- 
quired to meet in order to sell their products. Customers invariably 
insisted upon comparing prices quoted in the Pittsburgh district, and 
the simplest method of assuring such comj^arison was the use of the 
Pittsburgh quoted prices as a base. 

The Chicago district never has and does not now produce iron and 
steel sufficient to meet the demands of consumers in the district. A 
very large part of such consumers must necessarily buy their steel 
and iron products from the Pittsburgh district. 

The investment in modern steel ]Dlants is ver}^ large and for that 
reason steel plants are not mobile. They can not readily move from 
point to point, and to endeavor so to do would involve very great 
economic waste in the amortization of the cost of abandoned plants 
and would be altogether undesirable. 

The controlling factor in deteTmining prices has always been the 
question of whether demand is in excess of production or production 
in excess of demand. 

The use of the Pittsburgh price as a base in no way controls the 
price which the producer makes to the consumer. 

If there is a surplus of steel products on the market, the desire to 
dispose of the product involves a reduction of prices, sometimes to 
the point of an actual loss. Where the supply is less than the de- 



' . 73 

mand, consumers often offer to pay advanced prices or premiums to 
insure deliveries, and the result is the same whether a Pittsburgh 
base price is the groundwork of competition or whether each steel 
plant arrives at the prices demanded by some other method of com- 
putation. 

If prices were fixed by agreement among the producers, it would 
be a matter of small importance bj' what system of figures the agreed 
price was reached. 

Wlien prices are made as a result of competition, as is the case with 
all sales made by the Inland Steel Co., it is likewise of little impor- 
tance what method of computation is used. 

The Inland Steel Co. has a given output. That output it markets 
at the best prices reasonably and fairly obtainable. When customers 
are not plentiful, it cuts that price down to a figure which will enable 
it to sell its products. 

The individual members of the association making the application 
have seemed generally to have enjoyed a period of great prosperity 
during the last few j'^ears. The public statements of such of them as 
have been accessible have shown pi'ofits favorably comparable in pro- 
portion to capital invested with the profits of the steel producers so 
far as the same are matters of public laiowledge. 

Under the present system of quoting prices, with the Pittsburgh 
base as a standard, the members of the association are enabled to 
readily compare prices quoted by steel producers located in anj^ part 
of the country. 

If the use of a different base price did not materially alter prices 
quoted, it would obviously be useless to disturb the present custom. 

If, in fact, the steel producer in any given locality undertook to 
base his prices solelj^ on cost of production, giving the customer the 
benefit of all freight costs from competitive points, it is plain that 
the result would be to create a local monopoly on behalf of the steel 
producer in any given locality until the entire product of such local 
producer had been sold. Thereafter the customer would be obliged 
to pay higher prices to producers at other points through the addi- 
tion of freight rates. 

It is believed that this would result in absence of competition 
where onlj' a single prodvicer was located, or in competition re- 
stricted to the local competitors in all other districts except Pitts- 
burgh, which is the only district producing a considerable surplus. 

The competitor buying his steel products from the Pittsbui-gh 
district, after the local limit had been reached, would be at a disad- 
vantage with his competitors, who had bought at lower price from 
the local pi-oducer, while in years of normal demand the Pittsburgh 
producer, knowing that the local supply was unequal to the local 



n 

demand, would be able to await the necessary inquiries from those 
■who had been unable to supply their wants from local sources. 

Under such circumstances it is respectfully submitted that ordi- 
nary business judgment would lead the surplus local demand to bid 
up the local supply to approximately the cost of delivery from 
Pittsbuigh, and the element of vexation and uncertainty would have 
resulted without materially changing the situation. 

If such a result did not ensue then conditions of inequality among 
the different consumers in the same locality would create hardships 
far greater than the present system, because in most articles into 
which the rolled-steel products enter contracts must be made long 
prior to the ultimate completion of the article, and reasonable cer- 
tainty as to price is quite as important as any slight difference in 
cost. 

As a uniform standard of money in a given market is a prime 
requisite of successful commerce, so a standard level of prices for 
steel, resulting from nation-wide competition, is of almost equal 
importance to industry. 

If it were possible, as the application seems to contemplate, to 
procure producers of steel to sell their products wholly upon the 
basis of cost, plus some percentage, and with every producer figur- 
ing a different cost, or the same producers figuring different costs at 
different plants, with such imcertain elements of cost as the obso- 
lescence and amortization of verj'^ large capital A'alues involved in 
the installation of modern plants and equipment, and with competi- 
tion localized as far as such action could localize it, it is respectfully 
submitted that a system of individual bargaining must spring up 
which would be contrary to the modern theoi'}" of commerce to 
which the Commission is committed. 

Moreover, as glut or deficit more commonly occur in localities 
than in the entire country, the disadvantageous features of over- 
supply or overdemand would, in the particular locality, be of more 
frequent occurrence and of accentuated disadvantage, and local 
conditions could be met only by return to what is practically the 
Pittsburgh base: that is, the stabilization of supplies throughout 
the country by drawing on the locality where production is in excess 
of demand to make good the deficiency in the localities where the 
reverse is the case. 

The Inland Steel Co. having its plant entirely, and its business 
mainly, in the western field is not confronted with any problems 
which might affect a competitor having plants in diffei'ent districts, 
but any regulation which would compel the competitor having 
plants in the same district as the Inland Steel Co., and other jjlants 
in other districts, to sell in the district in which it directly com- 



. 75 

peted with the Inland Steel Co. at a price lower than that naturally 
based upon the laws of supply and demand and market conditions 
generally would be obviously injurious to the Inland Steel Co. per- 
haps to a greater degree than to the competitor, which might make 
up in one district for its loss of profits in another. 

The Inland Steel Co. respectfully suggests that trade customs like 
the practice under consideration, which have grown up in times of 
keenest competition, are usually based upon some adequate reason 
and should not lightly be set aside. Moreover, this particular trade 
custom of basing steel prices upon Pittsburgh was officially ap- 
proved by the War Industries Board (Official Bulletin, June 24, 
1918) and by the President, as evidenced by official announcements 
made by them. 

The Inland Steel Co. has maintained its competitive bixsiness under 
conditions of nation-wide competition. It believes that it can main- 
tain its business if such competition is localized, but it believes that 
localization of competition would be a disadvantage as against 
universal competition, which, based on a clearly understood scale of 
prices, produces a better understanding and relationship between 
the steel producers and their customers. 

Moreover, the results of the present use of Pittsburgh as a basing 
point are largely exaggerated in. the application in so far as that 
practice affects the great bulk of the western and northwestern 
territory. 

The use of through rates based upon the practice of fabrication 
in transit and the difference between through rates and the sum of 
local rates in many parts of the country minimize the freight dif- 
ferential, and in many cases all-water or combined rail-and-water 
rates as compared with all-rail rates from Chicago to points west 
leave little margin in the local rate from Pittsburgh to Chicago. 

The Inland Steel Co. therefore expresses its conviction that the 
applicants, as well as steel users general^, would be quite as likeh' 
to be harmed as to be helped by the granting of the application, 
and the Inland Steel Co. believes that the obvious result of forbid- 
ding the use of the Pittsburgh base rate would be to introduce a 
large element of confusion and uncertainty into steel and iron prices 
which would be especially injurious under the present conditions of 
economic unrest and uncertainty. 



Kespectfully submitted. 



Chicago, August 36, 1919. 



I:sLAiSrD Steel Co., 
By G. H. Joxes, 

Fi7'st Vice President. 



76 

ANSWER OF THE INTERSTATE IRON & STEEL CO. 

[Answer of Interstate Iron & Steel Co., one of the respondents to the application of the 
Western Association of Uolled Steel Consumers for a complaint against the United 
States Steel Corporation and others.] 

To the Federal Trade Commission, 

WasJiingfon, D. C: 
Interstate Iron & Steel Co., one of the respondents to the above- 
named application, for answer thereto says : 

1. Respondent is the owner of a rolling mill at East Chicago, Ind., 
of the type known as hand bar mills. At said mill it rolls steel 
billets into shapes and bars and produces muck bars from pig iron 
and scrap, and rolls such muck bars into iron bars and shapes, or 
combines such muck bars with scrap and rolls such product into 
iron bars and shapes. Respondent produces no other rolled iron 
or steel products at said mill aforesaid, and produces no rolled iron 
or steel products elsewhere in the territory referred to and described 
as the Chicago district in said apjplication for a complaint. The 
raw material used in such production is in part pig iron and scrap, 
which respondent purchases in the market and does not produce, 
sell, or deal in. The other raw materials used in such production are 
steel billets, which respondent produces in open-heartli furnaces in 
Chicago, 111. Such steel billets are likewise produced from pig iron 
and scrap, which respondent purchases in the market and does not 
produce, sell, or deal in. 

Respondent does not own or operate anj^ blast furnaces and does 
not own or use any iron ores in the production of iron and steel and is 
not an integrated steel producer. The raw material used by respond- 
ent includes in its cost to respondent a profit to the producer thereof. 
The other respondents to said application are integrated producers 
using iron ores as raw material. 

2. Respondent denies that the cost of such product as is produced 
at its said East Chicago, Ind., mill is lower than the cost of similar 
product produced by the Carnegie plant of the United States Steel 
Corporation or lower than the cost of similar product produced at 
other mills in the Pittsburgh district, and, on the contrary, avers and 
charges the fact to be that the cost of the rolled iron and steel shapes 
and bars produced at its East Chicago, Ind., mill (to which products 
its output is limited) is substantially higher than the cost of similar 
product produced by the Carnegie plant and similar mills in the 
Pittsburgh district. The products produced by respondent at said 
East Chicago mill are produced at high cost by high-grade skilled 
workmen through the use of hand bar mills. 

The other respondents to said application and said Carnegie plant 
of the United States Steel Corporation, and other producers in the 
Pitt.sburgh district, operate continuous bar mills. 



77 

3. Eespondent sells iron and steel shapes and bars produced at its 
said East Chicago mill in interstate commerce in the territory re- 
ferred to in the application as the Chicago district, and not in Pitts- 
burgh or the territory tributary thereto, at the best prices obtain- 
able therefor as fixed by the laws of supply and demand and as neces- 
sar}' to meet < ompetition, in good faith, and without discriminations 
in price between different purchasers. 

Respondent admits that in reasonably noi'mal times, when the de- 
mand for such products about equals the supply, the prices obtained 
about equal the Pittsburgh prices plus the freight from Pittsburgh 
to delivery point; that at other times, when the supply exceeds the 
demand, prices obtained only slightly exceed the Pittsburgh price. 
Respondent avers that the producers of such products in the Chicago 
district are in normal times able to obtain therefor a differential 
represented by all or part of the freight from Pittsburgh to delivery 
point in excess of the price obtained for similar products by pro- 
ducers in the Pittsburgh district by reason of the fact that less 
than one-half of such products as are consumed in the Chicago dis- 
trict, meaning the territory described in the application, is produced 
therein, and that at least one-half of such products as are con- 
sumed in said district is produced and sold by mills situate at Pitts- 
burgh or in territory tributary to Pittsburgh. While it is true that 
the Chicago producer realizes, net, in normal times, f. o. b. its mill, 
more than a producer in the Pittsburgh district does upon sales in 
the Chicago district, the price to the consumer in the Chicago dis- 
trict for products produced in said district is frequently less, and 
never higher, than the price of similar products produced in the 
Pittsburgh district and sold in the Chicago district, and the con- 
sumer in the latter district, on the whole, is benefited by competition 
between producers in different districts. Respondent denies that the 
prices at which such products are sold by it are fixed by concert of 
action, agreement, or understanding, had either directly or indirectly 
with any other producer or producers of such products, or that such 
prices are arbitrary or unreasonable or allow any more than cost plus 
a reasonable profit, and respondent avers that the prices so obtained 
are market prices, fixed by competition prevailing in the Chicago 
district, and will obtain and be based in the same way hereafter by 
the law of supply and demand so long as the production of such 
products in said district is substantially less than the consumption 
thereof. 

4. Respondent admits that it considers and uses the Pittsburgh 
price to arrive at the price to be quoted to its customers, but gen- 
erelly quotes a price either f. o. b. East Chicago, Ind., or a price 
f. o. b. the delivery point. 



78 

5. Respondent does not quote to all or any agricultural-implement 
manufacturers or to other consumers or purchasers of such products 
as it produces at its East Chicago mill a price less by all or a part 
of the freight from Pittsburgh to the delivery point unless such price 
is also quoted and made to members of the applicant and other 
consumers in said Chicago district, and avers and charges the fact 
to be that it sells to such manufacturers only in a limited way, and 
when it does sell such product to such manufacturers, it sells at the 
same price that it does to its other classes of consumers. 

6. Respondent further avers and charges the fact to be that it 
does not produce or sell rails, angle bars, or splice bars to railroad 
companies, but does sell to railroad companies iron tie plates, which 
are sold in said Chicago district in competition with steel tie plates 
produced in the Pittsburgh district as well as in the Chicago district. 

7. Respondent further avers and charges the fact to be that when 
iron and steel products were first produced in the Chicago district 
all rolled iron and steel products theretofore consumed in said dis- 
trict had been produced by mills situate at Pittsburgh or in territory 
tributary thereto, and the original Chicago producers were able to 
obtain in competition with Pittsburgh producers, and did charge and 
obtain (except during times of depression) for products produced iia 
said Chicago district and sold therein, the same price at which Pitts- 
burgh j)roducers sold such products — that is to say, the Pittsburgh 
price plus the freight from Pittsburgh to the point of delivery; 
and that such business practice has ever since continued substan- 
tially without interruption to the present time. 

8. Respondent established its said rolling mill at East Chicago, 
Ind., in 1905, knowing its production costs would be materially 
higher than those of mills in the Pittsburgh district, and believing 
at the time that such higher costs would to some extent be equalized 
in competition, in that as a producer of such products in the Chicago 
district respondent would be able to obtain therefor the Pittsburgh 
price plus the freight to deliver}^ point until and unless the produc- 
tion of the Chicago district would equal or exceed the consumption. 
Respondent believes that although the production of the Chicago dis- 
trict has gi'eatly increased in recent years that for many years the 
consumption of such products will continue to exceed the production 
thereof. 

9. Respondent is advised that if the Commission should take juris- 
diction of the application, issue a complaint, and hereafter order 
a basing price at Chicago that members of the applicant would still 
pay the equivalent of the Pittsburgh price, plus the freight to point 
of delivery, as the needs of consumers in said Chicago district 
can not but in part be provided for by producers therein and must 



79 

in large part, for yeai's to come, be provided for by production and 
sale from mills situate at Pittsburgh, or in territory tributary 
thereto ; and if, as a result thereof, prices should be lowered, it 
would tend to lessen competition and tend to create a monopoly 
in fully integrated producers in the Chicago district, and would 
only tend to temporarily reduce the price of such products and 
only reduce the price on a portion of the amount consumed in the 
Chicago district. Any such order would tend to curtail, if not 
stop entirely, the groAvth of producers not fully integrated and de- 
pendent, because of higher costs, on such differential for a profit. 
Respondent also submits that it would be unreasonable and unfair 
and beyond the powers of the Commission to require producers in 
the Chicago district to sell such products at less than the prevailing 
market prices and at less than the prices which consumers in said 
district are certain to pa,y to producers situate in tlie Pittsburgh 
district for a large part of their requirements. Respondent is ad- 
vised that the Federal Trade Commission is without jurisdiction 
under the provisions of the Claj'ton Act and the provisions of the 
Federal Trade Commission act, referred to in the application, to 
fix the jDrice at which respondents to said application must sell such 
products, and submits that the allegations set forth in the com- 
plaint, even if true as to respondent, which is denied, do not set 
forth unfair methods of competition within tlie meaning of section 
of the Federal Trade Commission Act, and are not discrirninations 
in price between different purchasers of commodities within the 
meaning of section 2 of the Clayton Act, as the discriminations 
in price claimed in said application to have been made between 
different purchasers are claimed therein to have been made between 
different classes of purchasers and not between different purchasers 
of the same class in competition Avith each other, as is contemplated 
by section 2 of the Clayton Act, and such discriminations in price 
as are in said application claimed to have been made do not lessen 
competition or tend to create a monopoly in any line of commerce. 

10. Respondent submits that no violation of section 2 of the 
Clayton Act or of section 5 of the Federal Trade Commission Act 
is sustainable against respondent in that respondent does not pro- 
duce or sell its said products in the Pittsburgh district, does not 
produce or sell pig iron, and does not sell any of the products 
enumerated in section 1,0 of the application, either to agricultural 
implement manufacturers or to railroad companies, or to any other 
class of consumer, at anj' price or upon any terms different than 
it makes to and obtains from consumers in other lines or from mem- 
bers of the applicant. The fact that respondent, having located its 
mill in a district consuming more of such products than are pro- 
duced therein, charges therefor and is able to obtain therefor, with- 



80 

out agreement, understanding, or concert of action "with other pro- 
ducers of iron or steel products, the same price that consumers in 
said district are required to pay producers situate elsewhere for a 
large part of their requirements, can not be held to be a violation 
of any provision of either the Clayton Act or the Federal Trade 
Commission Act. 

Hence, respondent prays for the entry of an order denying the 
application for a complaint against the respondent and for an order 
forthwith dismissing it as a respondent to said application. 
Dated Chicago, 111., August 29, 1919. 

Iktjsrstate Ikon AjSid Steel Compa^jt, 
By S. J. Llewelltn, President. 
Newman, Poppenhusen, Stern & Johnston, 
Attorneys for Respondent, 

11 South La Salle Street, Chicago, III. 
C. H. PoppENHusEN, of Coimsel. 



STATEMENTS FROM OTHERS THAN APPLICANTS FAVORING APPLICATIONS. 



STATEMENT OF SOUTHERN BRIDGE CO. 

Birmingham, Aia., August ^8, 1919. 
Fedekal Trade Commission, 

Washington, B.C. 
Gentlemen: In reference to the question of base steel prices we 
wish to enter our protest against the present practice of using Pitts- 
burgh, Pa., as a basing point regardless of the production of steel at 
a lower or equal costs at other points. 

At present we obtain a certain proportion of our rolled-steel 
shapes, say 60 per cent or greater, from local mills in this district, 
on which we pay at the rate of Pittsburgh base plus $3 per ton. 

In competition with fabricators from the Pittsburgh territory to 
points north we are thus placed at a disadvantage, for, assuming 
that our costs of fabrication is the same as fabricators in the Pitts- 
burgh district, we are handicapped in the sum of $3 per ton in 
bidding on fabricated steel work to points that carry an equal 
freight rate between this city and Pittsburgh. 

We trust that after full investigation action will be taken to place 
this distiict on the basis to which it is entitled. 
Yours very truly. 

Southern Bridge Co. 
W. E. Starbuck, 
Secretary and Treasurer . 

STATEMENT OP McVOY SHEET & TIN PLATE CO. 

Chicago, August 26, 1919. 
Federal Trade Commission, 

Washington, D. C. 
Gentuemen: The American Iron and Steel Institute have for- 
warded us a copy of your letter of July 26 as regards the Western 
Association of Rolled Steel Consumers' complaint relative to selling 
Pittsburgh basing point, etc., and asking us to express our views in 
the matter. 

Assuming that the cost of production is approximately the same at 
Chicago as at Pittsburgh, we see no reason why western mills should 
be allowed to charge the difference in freight rate as an additional 
profit, and if Chicago should be made a basing point the same as at 
Pittsburgh, if it can be proved that the cost of production in Chicago 
139378—19 6 (81) 



82 

territory was materially higher, even to the extent of, say, $1 a ton, 
then a fixed differential over Pittsburgh would be equitable. 

We wish to call particular attention to the fact that a large number 
of the western mills insist upon selling their material f. o. b. mill if 
for shipment to other than western points, and plus tariff rate of 
freight from Pittsburgh if for shipment to western points. In other 
words, there is no question of equalization regardless of whether 
shipment goes east or west or north or south. In every case the 
mills insist upon securing the advantage. On shipments to the 
Pacific coast, where the freight rates are the same as they are from 
Pittsburgh, some of the mills have made the same price as the Pitts- 
burgh mills, while others refuse to sell on that basis. 

In ordinary times mills located in Chicago district have absorbed 
the freight from Chicago to Detroit and other southern Michigan 
points, or sufficient to equalize the Pittsburgh freight rate, whereas 
if the same material is purchased for shipment to, say, the Missoviri 
River, the contrary is the case. For the sake of concrete example, 
let us say that the base price on sheets is $4.35 Pittsburgh, and that 
the freight rate from Pittsburgh to Detroit is 23 cents, making $4.58 
Detroit; the Chicago freight rate is 27 cents, making the Chicago 
price $4.62; the freight rate from Chicago to Detroit is 15 cents; 
the Chicago mills sell at $4.58 Deti-oit, netting them $4.43 at the mill, 
whereas if they shipped the same material to Chicago or Kansas 
City they net $4.62. The Chicago or western buyers " get the short 
end of the stick." 

Yours very truly, 

McVoY Sheet & Tin Plate Co. 
E. J. McVoY. 

STATEMENT OF BAILEY-BURUUSS MANUFACTURING CO. 

Atlanta, Ga., August 22, 1919. 
Hon. W. J. Harris, 

United States Senate, Washington, D. G. 

My Dear Mr. Harris: As you are aware, our line is exclusively 
that of metal products — steel bar, structural steel, pipe, shafting, a 
very large tonnage of sheet steel, plates, pig iron, coke. This con- 
stitutes 99 per cent of our crude products, all of which are made into 
elevating, conveying, and power transmission for necessary and essen- 
tial industries, such as cottonseed-oil mills, grain mills, feed-mixing 
plants for man and beast, sugar mills, rice mills, fertilizer factories, 
and cement mills, and distributed very largely south. 

For some reason during the war period, as you are aware, Pitts- 
burgh, Pa., was made a basing point, in consequence of which all 
manufacturers at any point located, even though with a very nominal 



83 

freight on these products at the door, have to pay the freight from 
Pittsburgh to Atlanta; that is, in Birmingham, where pig iron, sheet, 
plate, structural steel, coke, etc., is produced, the freight heretofore 
was 19 cents. It is now 50 cents — the Pittsburgh freight to Atlanta. 
With a large tonnage aggregating hundreds of tons of each of the 
above-named products, you will readily see the great injustice done 
to us and to all metal- working plants. 

We understand that Chicago with a very much lower freight rate 
from Pittsburgh, although there are a large number of steel mills in 
Chicago, they add the freight rate from Pittsburgh to Chicago to 
their price, and that Chicago has this matter up before the Federal 
Trade Commission. Certainly, Atlanta and all cities adjacent to 
Birmingham, as, according to the statement of Judge Gary of the 
United States Steel Corporation last week, that Birmingham can 
produce iron and steel as cheaply as any producing center in the coun- 
try, it is manifestly wrong and unjust that the South should be de- 
prived of their rights in this way. If Chicago can make demands 
where nominal freight of 15 cents or approximately exists, certainly 
where an actual difference of 31 cents a hundred pounds difference 
on these commodities exists we are clearly within our rights. 

It also further develops, evidently encouraged by this velvet 
secured, that the mills in Birmingham, on standard tank boiler sheet, 
stimulated largely by war conditions and for the purpose of securing 
excess profit, have advanced the tank classification to that of blue 
annealed, and all steel mills throughout the entire United States 
have conformed to same, the difference being 25 cents per 100 pounds. 
This is positively outrageous, and is not justifiable under any con- 
ditions, as the eastern and western sections have the privilege and 
advantage of securing sheets, gauges 10 and heavier, at a price of 
$3.30 per 100 pounds, whereas all institutions in the South must 
conform to a price, whether they order what is known as blue 
annealed or black tank sheet, must pay 25 cents per 100 pounds in 
excess of $3.55. This is a gross discrimination against the South, 
as the poor old South has been discriminated against ever since the 
days of the Civil War, and certainly in this age of advanced civiliza- 
tion some protectory measure should be undertaken to help the 
South in this as well as many other lines. 

We ask that you note this matter very carefully and bring same 
before the trade commission at once. Thanking you for your atten- 
tion, we await and remain, 
Yours very truly, 

BAILEY-BtrREUSS MANUFACTURING Co., 

J. O. Bailey, 

President and Treasurer. 

And with a southern-born President and Democratic Party, too ! 



u 

Statement or cary safe co. 

BuTFALO, N. Y., August 22, 1919. 
Federal Trade Commission, 

Washington, D. C. 
Gentlemen : As we understand the "Western Association of Rolled 
Steel Consumers have made application for a complaint against the 
United States Steel Corporation and others in regard to basing point 
for steel, it is our desire that we be listed as complainant with the 
association above mentioned against the present method of making 
Pittsburgh, Pa., the only basing point for steel; and while the appli- 
cation above referred to, we believe, refers to Chicago alone, it is 
as unjust to Buffalo and all other localities to be obliged to pay 
freight from Pittsburgh to destination where the shipment originates 
at the point of delivery. 

Your Commission is earnestly requested to adjust this situation 
by making the basing point for steel the point of shipment as applies 
on all other commodities. 
Yours very truly, 

Cary Safe Co. 

statement of fuller & SONS MANTJFACTTJRING CO. 

Kalamazoo, Mich., August 22, 1919. 
Federal Trade Commission, 

Washington, D. C. 
Gentlemen : "We notice in a bulletin of the National Association 
of Manufacturers that an application has been made to your body 
by the "Western Association of Rolled Steel Consumers for the issu- 
ance of a complaint against the United States Steel Corporation 
regarding the making of prices by said corporation f. o. b. Pitts- 
burgh instead of f. o. b. Gary or other shipping points where their 
products are actually manufactured. 

Permit us to say that we consider the complaint an entirely 
proper one, and we trust that the result will be that this vicious 
practice will be terminated. "We, as well as thousands of other 
concerns using steel, have been mulcted by this practice, which we 
consider to be without any possible foundation of justice. No 
doubt you will be glad to receive the opinions of people affected, 
consequently we are offering ours. 
Yours respectfully, 

Fuller & Sons Mfg. Co., 
F. D. Fuller, President. 



85 

STATEMENT OF GIBBES MACHINERY CO. 

Columbia, S. C, August 21, 1919. 
Federal Trade Commission, 

Washington, D. C. 
Gentlemen : AVe understand that you are now giving considera- 
tion to the question of having other basing points than Pittsburgh. 
We feel that it is a great injustice to southern business in general 
and to southern consumers of steel, etc., in particular to use Pitts- 
burgh as a basis point. We do not see any more reason why this 
standard should prevail in the steel business than in any other 
business. Pittsburgh is a steel center, of course, but this is no reason 
why other points should be discriminated against. We believe that 
the i)roper adjustment of the matter would be to eliminate all 
basing points, but if this system is to be continued, then certainly 
Birmingham should be made a basis point. The reason for this is 
so plain and apparent that no further comment from us is necessary. 
We urge your consideration of a fair readjustment, whereby the 
South will receive just treatment in this very important matter. 
Yours very truly, 

Gibbes Machinery Co., 
A. M. GiBBES, President. 

STATEMENT OF THE NAVY DEPARTMENT. 

Washington, 11 August, 1919. 
To the Chairman of the Federal Trade Commission, 

Washington, D. C. 

I have the honor to reply to communication dated July 29, 1919, 
regarding application of the Western Association of Rolled Steel 
Consumers for the issuance of a complaint by the Federal Trade 
Commission against the United States Steel Corporation and others. 
It appears that the practice of using Pittsburgh as a basing point 
for steel prices arose purely as a war measure, so far as the Navy is 
concerned. It was necessary as such, in view of the fact that steel 
was not purchased during the period of the war, but was allocated 
by the War Industries Board, that board having in mind, in its allo- 
cations, mills where productive capacity was not running full force. 

It will be appreciated that in the allocation of material it was 
necessary that there be a basing point as well as base prices. Other- 
wise, east coast consumers would have raised an objection to mate- 
rial being allocated to them from western mills and west coast con- 
sumers would have objected to such allocations from eastern mills, 
the objections in both cases being based on the question of freight. 

It is vmderstood that prices have been quoted f. o. b. Pittsburgh 
base during the past 20 years. This was due primarily to the fact 
that companies having more than one mill do not always know which 



86 

mill will roll the material at the time they submit their bid. It is 
understood that they assign the work to whichever mill is at the 
time of receiving the business either doing similar work or is in 
need of work. 

In bids recently opened covering steel material most of the bid- 
ders submitted their quotations for delivery at Pittsburgh or else 
named a price for delivery f. o. b. their mill with freight between 
Pittsburgh and Chicago added. The material in question was for 
navy yards situated on the western coast. It was noted that the 
Phoenix Iron Co., with a plant at Phoenixville, Pa., did not bid, it 
being understood from their representative that the company did 
not believe that it could absorb the freight between Phoenixville and 
Pittsburgh. 

It is believed that the Bethlehem Steel Co., who submitted quo- 
tation f. o. b. Pittsburgh, had the same reason for this action. Both 
of these concerns being the farthest east mvist procure their raw 
material from Pittsburgh and points west, and in absorbing the 
freight to Pittsburgh were really subjected to double freight charges. 
It is understood that under the Pittsburgh-base scheme mills that 
are between Pittsburgh and point of destination charge on their 
invoices the difference in freight as between Pittsburgh and their 
mill, while in cases where Pittsburgh is between mill and destination 
the freight is allowed from mill to Pittsburgh. 

The department is of the opinion that the use of the Pittsburgh- 
base rate ought to have been discontinued when allocation stopped, 
and it is thought that its survival is probably due to the action of the 
price-fixing board of the Department of Commerce, which approved 
a fixed price for steel. 

The Navy desires that bidders quote actual mill prices and actual 
freight charges, and it would be to the best interests of the depart- 
ment if steel mills submitting bids would not use the Pittsburgh rate 
of freight in their quotations, but would use the actual rates of 
freight which exist. The tendency of the use of the Pittsburgh 
freight rate is to make the freight charges of all bidders the same, 
and so far as freight is concerned results in a combination among 
those submitting quotations and does not give either real competition 
or the benefit of lower freight rates in cases of mills located near the 
navy yards and stations concerned. Under the system proposed the 
Navy could obviously save by placing the contract at the mill with 
the shortest rail haul and lowest freight rate to destination. 

It is sincerely hoped that this statement of the views of this 
department will assist the Commission in arriving at a conclusion 
with regard to the complaint above referred to. 

Franklin D. Roosevelt, 

Acting Secretary. 



87 

STATEMENT OF CARBO STEEL PRODTTCTS CO. 

Chicago, III., July 3^ 1919. 
Federal Trade Commission, 

Washington, D. C. 

Gentlemen : With further reference to this question of price fix- 
ing by the stee] companies. Of course, you know the movement by 
the Western Eolled Steel Consumers to try to get the price of steel 
to include Chicago delivery; as it is to-day thsy are all made f. o. b. 
Pittsburgh. 

It would seem clear that the Iron Age, with their custom that has 
been established of their printing this information on prices, is a 
medium of maintaining prices. There are probably some meetings 
going on from time to time about which you must no doubt have 
some information and more than w«. We simply point to these 
agreements as standards that are adopted from time to time by 
various associations all referring to the matter of price. 

It must be in the Federal Trade Commission's power to stop 
this practice. 



Yours very truly, 



Carbo Steel Products Co., 
C. L. MiCHOD, Manager. 



Chicago, III., August 12., 1919. 
Federal Trade Commission, 

Office of the Chairman., Washington, D. C. 

Gentlemen : Your letter of July 30, subject Application 9-1296, 
received. We feel that this Pittsburgh " basis " is simply a tool 
with which to control the prices of steel amongst the steel companies. 
We rather feel it is not just that the steel companies should have one 
price for sheet steel and a price below this for a finished product 
which they manufacture; take, for example, steel fence posts. The 
American Steel & Wire Co. are selling a 10-pound hot galvanized 
steel fence post for 37 cents each made out of sheet iron, on which 
there is considerable work in the form of punching done and shaping 
of same. The steel for this post is sold to us on the basis of 47 cents 
for the same amount of steel f. o. b. Pittsburgh. This could not be 
done and sustained if there were not a combination of some kind in 
effect to maintain these steel prices, and it works an injury on any 
smaller manufacturer. 

The reason given by the American Steel & Wire Co. for selling- 
finished products under the price at '/vhich they sell sheet steel is to 
the effect they have to do it on acco int of competition in the post 



88 

market. We can hardly see anything fair in this kind of trade or 
business conditions. 

We shall be glad to hear from you as to what your views are in 
the matter. 

Yours very truly, 

Carbo Steel Products Co., 
C. L. MicHOD, Manager. 

STATEMENT OE GREAT WESTERN MANTJFACTTJE.ING CO. 

Laporte, Ind., A2yril ^, 1919. 
Department or Commerce and Industry, 

Washington, D.G. 
Gentlemen: I am inclosing a copy of a letter I sent the Union 
Drawn Steel Co. to-day. 

I want to go on record as objecting to this method of naming 
price on material and penalizing the purchaser 30 miles from the 
source of supply on account of price fixing at Pittsburgh. Will 
you kindly take it up? 
Yours truly, 

E. J. LoNN, President. 



Lapokte, Ind., April Jt, 1919. 
Union Deawn Steel Co., 

Chicago, III. 

Gentlemen : We note yours of the 3d, and we are frank to say we can fully 
understand how material should be or could be sold f. o. b. the plant where 
they are made, but when you make a price f. o. b. Pittsburgh and then ship 
from Gary, which is only 30 miles from Laporte, and charge the difEerence, 
that is absolutely bad practice and unfair. On the face of it that shows a con- 
clusion of price fixing and prevents any possibility of benefit because of close 
proximity to a mill for the user of steel a short distance from Pittsburgh. I 
am opposed to any such practice, and this is one of the things that govern- 
mental jurisdiction should promptly stop. 

Supposing the same thing was true about coal. Here we have coal within 
100 miles of us in the State of Indiana. We could not buy it f. o. b. the mines 
and pay the regular rate of freight, but would have to be penalized because of 
some coal in the Pennsylvania district. It would be just as reasonable as your 
steel situation. 

I again repeat I am opposed to any such practice. It is wholly unfair 
and should not only be opposed but promptly discontinued. Because if it is 
right in the steel industry it would be just as right in any other industry. 
Tours truly, 

Geeat Westeen Manufactueing Co., - 
E. J. LoNN, President. 



89 

Laporte, Ind., August i, 1919. 
Mr. Victor Mttedock, 

Acting Chairman Federal Trade Comonission, 

Washington, D. G. 
Dear Sir : Yours of July 30 at hand. 

The application blanks that you stated were inclosed were not in 
your letter. Therefore have not received them. 

I believe I covered the situation in my previous letter. It is 
ridiculous when we are 30 miles away from Gary and 35 miles from 
Indiana Harbor, and only 50 miles from South Chicago, which is 
our nearest source of supply, that we are compelled to pay freight 
from Pittsburgh, which is 400 miles away. It is too contemptible 
a plan to be even considered or permitted in the United States. 
Yours truly, 

E, J. LoNN, President. 

STATEMENT OF UNITED STATES RAILROAD ADMINISTRATION. 

Washington, August 11, 1919. 

My Dear Mr. Fort: Referring to the letter from your Commis- 
sion of the 29th ultimo, relative to the complaint of the Western 
Association of Rolled Steel Consumers, I give you herewith a state- 
ment of my views, in response to the suggestion of your Commission. 

Attention is called to the present rates of freight per ton on rolled- 
steel products in carload lots from Pittsburgh, Pa., which is the 
basing point adopted by the steel industry for determining the price 
at which such products shall be sold by manufacturers located at 
all other points of production throughout the country, to a number 
of such points of production, as follows : 

Youngstown, Ohio $1. 50 

Buffalo, N. Y 4.30 

Harrisburg, Pa 4. 60 

Coatesville, Pa 4.90 

Philadelphia, Pa 4. 60 

Cleveland, Ohio 3. 40 

Chicago, 111 5. 40 

St. Louis, Mo 6. 80 

Birmingham, Ala 11. 50 

These rates, expressed in dollars per ton, represent the protection 
afforded to steel producers located at points other than Pittsburgh 
by the transportation costs, which under the arrangement complained 
of are assessed against consumers, irrespective of the actual cost of 
production; and in cases where the production costs may happen to 
be no greater or even less than in the Pittsburgh district the con- 
sumer, under this method, is arbitrarily obliged to pay this added 



Pueblo, Colo. : 

Bars and plates $19. 80 

Shapes 22. 20 

Duluth, Minn 9.90 

Knoxville, Tenn 9.80 

Richmond, Va 6.10 

Albany, N. Y 5. 40 

Atlanta, Ga 11.80 



90 

amount, although it does not enter into the cost of production or 
delivery so far as the manufacturer is concerned. 

There are doubtless localities where the cost of production is 
higher than in the Pittsburgh district, and in such cases the manu- 
facturer must base his selling price upon that cost, but it is also 
possible that the cost of transportation from Pittsburgh to such 
localities maj be greater than the difference in the cost of production, 
and to that extent the consumer may be arbitrarily made to pay an 
unreasonable profit to the producer. 

So far as the Railroad Administration is concerned, we know, for 
example, that the cost of producing rolled steel at Gary, in the 
Chicago district, is somewhat less than it is in the Pittsburgh dis- 
trict. In spite of this, we are compelled to pay $5.40 per ton more 
for the same article than we would pay if bought from mills in 
Pittsburgh, and, so far as the producer is concerned, this payment 
represents an added profit because no commensurate service is ren- 
dered. The same thing, of course, applies to all other points of 
production in varying degree, depending upon the true production 
costs in the different localities. 

A further serious objection to the Pittsburgh base price is that 
it furnishes a continuing confusing element when considering the 
■ reasonableness of steel prices (other than rail, to which the Pitts- 
burgh basis does not apply). When these prices are discussed the 
discussion proceeds with the Pittsburgh price as a standard, and yet 
the costs considered are the costs at each plant. The fact is that 
each plant not situated at Pittsburgh receives on a substantial part 
(and probably all) of its business not only the Pittsburgh price, 
which is the sole subject of discussion, but an addition thereto in the 
shape of a sum added to represent the freight rate from Pittsburgh, 
so that the sum total received in prices is substantially in excess of 
the prices which alone are discussed as the prices being received. 
Sincerely yours, 

Walker D. Hines. 

Hon. John Franklin Fort, 

Chairman Federal Trade C ommiission^ Washington, D. G. 

STATEMENT OF E. C. ADAMS. 

Kansas City, July 26, 1919. 
Mr. Victor Murdock, Washington, D. C. 

Dear Sir : Noting by the press that your Commission are to have 
hearings on the question of changing the trade custom of selling- 
steel, may we suggest that you give the whole country, who are in- 
terested in the matter, plenty of notice of the time and place of 
these hearings ? 



91 

There are at least a hundred other impoitant trade centers who 
should be given a base price if Chicago is to have one — ^Kansas City 
and other river towns, Denver, New Orleans/ Norfolk, Boston, 
Duluth; in fact, all important points who have to compete with 
Chicago for their trade and business. 

Also if the price matter is to be thrown wide open we hope all 
other commodities that are sold by trade custom at important pro- 
ducing point [s] plus freight will be included — oil, zinc, lead, sugar, 
coffee, and 40 or 50 other commodities. 

Structural steel is not included alone in the steel price, but, the 
whole line of things made out of steel are all sold and have been for 
40 years f. o. b. Pittsburgh plus freight, and if there is to be any 
change, everj^thing of or made out of steel should be included. 

We have no quarrel with either Chicago or Pittsburgh, but all 
large cities and commercial bodies should be given a fair and wide 
chance to be heard and an opportunity to present their claims for 
consideration. 

Won't you kindly announce through the Associated Press from 
time to time when and where these hearings are to be and give every 
one plenty of time to prepare their claims and case ? 

Your usual fair dealing on this matter will be, I am sure, greatly 
appreciated by the whole country. 
Yours truly, 

E. C. Adams. 

Starts Inqtjiey Into Prices of Rolled Steels. — United States Board Acts on 
Complaint Pittsburgh Basis is Unfair. 

Washington, D. C, July 2G. 

Tlie Federal Trade Commission lias acted on the complaint of the Western 
Association of Rolled Steel Consumers that the United States Steel Corpora- 
tion and other steel producers act in violation of the Federal Trade Commis- 
sion act and the Clayton Antitrust Act in selling rolled steel on a Pittsburgh 
basing-point basis. 

The commission to-day announced that it has undertaken a thorough in- 
vestigation of the subject to determine whether a formal complaint should be 
issued. In its complaint the western association urges that Chicago should 
be made another basing point in the fixing of ^teel prices. 

means " BIGGEST LAWSUIT." 

The action, which is undertaken by the Trade Commission as a friendly suit, 
has been pronounced by E. H. Gary, chairman of the board of the United 
States Steel Corporation, as " the biggest lawsuit ever tried in this country." 

The application for complaint made by the western association is presented 
by Attorney John S. Miller, of Chicago, as counsel. It says the membership 
comprises more than 700 fabricators of steel, operating in Illinois, Indiana, 
Michigan, Wisconsin, Minnesota, Iowa, Kansas, Missouri, Montana, Nebraska, 



92 

Oklahoma, Soutli Dakota, Texas, Utah, Washington, Wyoming, Colorado, and 
California. All ai'e tributary to what is known as the Chicago district. 

These interests say the United States Steel Corporation mill at Gary, Ind., 
produces steel at a cost substantially lower than at the Carnegie plant of the 
Steel Corporation at Pittsburgh or at other corporation plants in Pennsyl- 
vania. It is added that more than one-fifth of the rolled steel made in the 
United States is made by the respondent at Gary, Ind. 

PEICES CALLED tlNEEASONABLE. 

" The applicant submits that the normal, reasonable price for rolled steel 
should be measured by cost of production with addition of reasonable profits 
and without addition of a large and arbitrary increase which forms no patt 
of the production cost and is over and above such reasonable profit," says the 
complaint of the steel fabricators. 

The applicants declare that despite the fact that steel is made more cheaply 
at Gary, the complainants are compelled to pay a set price plus a freight rate 
of $5.40 per ton from Pittsburgh to Gary, although in fact the steel actually 
is not shipped from Pittsburgh at all. 

Certain discriminations in price, especially to agricultural implement manxi- 
facturers, are charged by the steel consumers. The whole method is alleged 
to be so repugnant to the Federal Trade Commission law and the Clayton Law 
that it should be ordered discontinued. 

STATEMENT OF J. H. WILLIAMS & CO. 

Brooklyn, N. Y., August 12, 1919. 
Federal Trade Commission, 

Washington, D. C. 

Gentlesien: The bulletin of the Chamber of Commerce of the 
United States, under date of August 1, advises the members of that 
body that the Federal Trade Commission has invited the views of 
all those interested in the question of basic points for steel prices. 

We take pleasure in inclosing herewith letters that we wrote to 
Hon. William C. Eedfield, Secretary of Commerce, under dates of 
April 25 and June 4, 1919, the second letter being in response to one 
from the Secretary in which he stated that the matter was not 
within his department's jurisdiction, but in which he undertook to 
give us his understanding of the situation from personal discus- 
sions with officials of the Federal Trade Commission, the Interstate 
Commerce Commission, and with his OAvn confidential advisors. 
AVhile these letters herewith are self-explanatory, we desire to state 
concisely our viewpoint. 

1. The present plan of using universally the Pittsburgh basing 
point, while possibly necessary for stability in the early days of the 
industry, is now discriminatory against users of steel located at 
points distant from Pittsburgh, but near to other steel-producing 
centers. The abuses of the present system are so obvious and so 



93 

familiar tliat we will not state them unless requested. It seems to 
us that there are two methods in making this condition more equi- 
table : 

(a) By recognizing that large steel centers or large market cen- 
ters are the logical basing points that will be fairest to the greatest 
number, as, for instance, Chicago, Pittsburgh, Buffalo, New York, 
and possibly such outlying steel-producing points as Denver, Colo., 
and Birmingham, Ala. If basing i3oints are desirable, the use of 
four or six such points would bring all users of steel within a reason- 
able approximation of equality. 

(&) To abolish all basing points and have all mills which want 
to enter a comiDetitive locality sell their steel f . o. b. mill with freight 
allowed either to destination or to the farthest competitive produc- 
ing point en route to the customer. 

It is obvious, of course, that this second alternative would require 
that the base price at mill be a shade higher than would prevail 
under the first alternative, because the customers in the centrally 
located manufacturing districts would have, indirectly, to absorb the 
cost of the delivery of the small part of the tonnage produced which 
maj" be shipped to distant points. 

We offer these as suggestions solely with the desire to be helpful 
and to see the present abuses eliminated, and would be interested to 
learn whether these alternatives seem workable to the Federal Trade 
Commission, and whether there is a reasonable chance that the 
jDresent conditions may be improved. 
Eespectf ully yours, 

J. H. Williams & Co. 
J. Harvey Williams, 

President. 

April 25, 1919. 
Hon. William C. Redfield, 

Secretary of Department of Commerce, 

Washington, D. C. 

My Dear Mk. Seceetary: May I trouble you once again to ask if you could 
tell me tlie position of the Department of Commerce and perhaps of the Attorney 
Genera) with respect to a very timeworn and fundamental condition with 
respect to the sale of steel in this country, namely, the establishment of the 
base price as at Pittsburgh ? I know, of course, that you have been into the steel 
question very thoroughly of late and that there must be some good reason 
why the sale of steel all over the country at the Pittsburgh base price is not 
frowned upon. 

The effect of this arrangement is very unequal, for manufacturers in Chicago 
and Buffalo, for instance, where large steel mills are located, are charged 
for the theoretical transportation from Pittsburgh on the steel made in their 
home cities. The steel mills, of course, have done this to allow Pittsburgh mills, 
for instance, to compete for Chicago business without giving away freight 



Allowance. Thus a Chicago or Buffalo user of steel is not permitted to derive 
advantage from the location of steel mills in his city, while at a point like 
Johnstown, Pa., for instance, where Cambria steel is made, a Johnstown 
buyer has to pay more for Cambria steel than a Pittsburgh buyer. 

You, of course, have been familiar with this for years, but I understand that 
there is now a considerable agitation for the establishment of Chicago as a 
base point equal with Pittsburgh, which is, no doubt, warranted, but if this 
should be permitted Chicago manufacturers could figure their steel at consid- 
erably lower rates than could we, located in Buffalo, where also there are im- 
portant mills. 

Would it not be possible for Buffalo and New York, for instance, to be made 
base points as well as Chicago in case the steel companies are averse to allow- 
ing freight rates to their customers to equalize with their competitors, as is 
done in most industries? If either of these plans were followed, there would 
be very few districts that would be discriminated against to any appreciable 
extent. If Chicago and Pittsburgh alone were basic points, concerns in Buffalo 
and New York, for instance, would have to pay about 22 to 27 cents per 100 
pounds, respectively, more than Chicago and Pittsburgh manufacturers, and 
1 cent per pound, as you know, is a serious dilferential in the makeup of an 
estimate. 

There is no use of one individual concern talking to the steel people on this 
subject, nor could any concern afford to have its name used in that connection, 
but I thought that you might be interested in this condition and would 
know how it can be remedied, at least in so far as those in the same town with 
steel mills are concerned. 
Faithfully yours, 



June 4, 1919. 
Hon. William C. Redfield, 

Secretary of Department of Commerce, 

Washinc/ton, D. C. 

Mr Deak Mr. Seceetaey : Thank you very much for your thorough explana- 
tion of May 29. in the matter of the base price of steel. Of course, the present 
arrangement simply invites consumers of steel to locate as near as possible to 
Pittsburgh, but about the only other suggestion that I could make which is not 
contained in my letter of April 25 would be for steel to be sold just like our 
tools or other commodities, that is, f. o. b. point of manufacture, with freight 
allowed to destination within the extreme limits of territory covered by pro- 
ducing mills. The result to the steel mills would be the same as the present 
because they would all be on an equality as to the price of freight, just as they 
are to-day, but instead of sharp discrimination between consumers in different 
localities as to-day, everyone from Colorado to New York would be on the same 
basis, the price of steel, of course, being advanced somewhat horizontally to 
meet the average cost of freight per ton. In other words, it would seem fair 
that there should be either three or four basic steel-producing centers, so that 
everyone would be reasonably near some center, or else the cost of freight should 
be evenly divided among everyone. 

I suppose there is some reason why this plan, too, could not have been adopted, 
and I offer it only because either plan would seem fairer as a whole than the 
present one. 

Faithfully yours, 



&5 
Statement of Chattanooga hoofing & foundky c6. 

Chattanooga, Tenn., August 5, 1919. 
The Federal Teade Commission, 

Washington, D. C. 

Gentlemen: We note that your Commission invites statements 
by all interested persons and organizations in the question of selling 
steel and other products on a basing point, such as Pittsburgh, and 
we wish to say that this policy discriminates against us, as we think, 
unfairly. 

For instance, we have purchased sheets both, in Newport, Ky., and 
Pittsburgh, and we have to pay the same price in both places, not- 
withstanding the fact that Newport is some 300 miles closer to us 
than Pittsburgh, and we enjoy no advantage whatever on account 
of location. In other words, the freight from Pittsburgh, to Cin- 
cinnati is added to the freight from Newport to Chattanooga, which 
works directly to the advantage of the sheet mills in Newport and 
proportionately against our advantage. 

There is no question but that sheets can be manufactured by the 

Newport Rolling Mill Co. on as low basis as they can be manufac- 

<tured in Pittsburgh, and what economic law can be called in to 

force us to pay an additional freight rate which does not inhere in 

the cost of the goods ? 

Another way it discriminates against us is the fact that one of 
our competitors might have his factory located at a point that would 
take a much lower freight rate from Pittsburgh than Chattanooga 
takes, and therefore the cost of his goods would be just this much 
less. When we have a rolling mill within 300 miles of us, why 
should we pay freight on a basing point that is 600 miles away 
from us ? 

We take it that these concrete instances as outlined are what you 
are seeking for, and we trust that when you are through with the 
investigation that this question of selling goods on a basing point 
will be done away with. 

Thanking you, we beg to remain, 
Yours truly, 

Chattanooga Roofing & Foundrt Co. 

statement of gemco manufacturing CO. 

MxLWAtTKEE, Wis., Augu^t 13, 1919. 
Federal Trade Commission, 

Washington, D. C. 
Gentlemen : The Gemco Manufacturing Co., being a user of rolled 
steel bars and shapes, wishes to enter a protest agamst the present 
Pittsburgh basing price of steel products. 



&6 . 

It is our understanding that this matter will be investigated and 
that a hearing will be held by the Federal Trade Commission at an 
early date and that the Federal Trade Commission desires written 
statements by interested persons and organizations on this matter. 

The Gemco Manufacturing Co. feels that the Pittsburgh base price 
being eliminated we would be able to buy our steel requirements 
either right here in Milv/aukee or from Chicago, and in this way 
save the Pittsburgh-Milwaukee freight. 

The Gemco Manufacturing Co. will greatly appreciate further 
advice on the results of the hearing and investigations to be conducted 
by the Federal Trade Commission, particularly in statements re- 
garding the advantage of a Pittsburgh basing point. 

Trusting that the Commission will consider this protest in its delib- 
erations, we are, gentlemen, 
Very sincerely yours, 

Gemco Manufacturing Co., 
H. B. Ibsen, 

Purchasing Agent. 

STATEMENT OF BRTJITSWICK MARINE CONSTRUCTION 

CORPORATION. 

Bbunswick, Ga., September 2, 1919. 
Hon. Victor Murdock, 

Acting Chairmcm Federal Trade Commission^ 

Washington, D. G. 

Dear Sir: We are obliged to you for your letter of the 25th 
ultimo, file No. 9-1296, inclosing copy of the application which you 
have received from the Western Association of Boiled Steel Con- 
sumers for the issuance of a complaint by the Federal Trade Com- 
mission against the United States Steel Corporation and others 
which will stop the practice of selling rolled steel on the basis of 
Pittsburgh freight rates. 

We heartily indorse the complaint of the Western Association of 
Rolled Steel Consmners. 

We use a large quantity of steel, both for general manufacturing 
purposes and for steel shipbuilding. In competition with concerns 
located in eastern territory for the sale of manufactured articles, 
you can readily see that they can sell in our territory at a lower price 
than we can sell in theirs, because, while we receive our steel from 
Birmingham, from which point the freight rate to Brunswick is 
only 25 cents per 100 pounds, we pay the rate from Pittsburgh, 
which is 59 cents, whereas the northern and eastern manufacturer, 
who actually receives his steel from the Pittsburgh district, pays 
only the actual freight rate from that point. 



97 

The same situation exists in connection with steel shipbuilding. 
Our steel plates come direct from Birmingham, from which point the 
freight rate of 25 cents to Brunswick is practically the same as the 
rate from Pittsburgh to shipbuilding points on the Delaware River. 
Yet, instead of paying the actual rate, we are charged 59 cents per 
100 pounds, on the theoretical Pittsburgh basis, or more than twice 
the freight rate that our northern competitors pay. 

After looking into the situation, the Federal Trade Commission 
will see that the present condition is unjust to the South as a whole, 
and we hope will have such measures adopted as will render it 
unnecessary for the southern rolled-steel consumer to pay more than 
the actual freight rate froin point of shipment. 
Yours truly, 

Beu>!Swick MAPaxE Construction Corporation, 
C. W. Irwin, General Manager. 

STATEMENT OF TOMLIN-HARRIS MACHINE CO, 

CoRDELE, Ga., August 30, 1919. 
Federal Trade Commission, Washington. 

Gentlemen : The application of the Western Association of Kolled 
Steel Consumers for a complaint against the United States Steel 
Corporation and others, copy of which you sent us, should in our 
opinion be granted to the Chicago district and territory tributary 
thereto, and not only should this be done, but the Birmingham dis- 
trict and territory tributary thereto should be included, for, as we 
understand it, Judge Gary and Mr. Schwab, of the United States 
Steel Corporation, have stated that steel could be produced as cheaply 
or cheaper in the Birmingham district than in any other place in 
the United States, and this being true, it is unduly prejudicial to 
the western and southern consumers of steel articles to pay a price 
for these articles based on the Pittsburgh price plus freight from 
Pittsburgh to destination, while the freight from Birmingham to 
destination might be and in all instances in the South are consid- 
erably lower. 

Yours very truly, 

Tomlin-Harris Machine Co., 
'R.'R.Ukkkis,.! President. 

STATEMENT OF SALEM IRON WORKS. 

Winstox-Salem, N. C., Seftember J, 1919. 
The Federal Trade Commission, Washington., D. C. 

Gentlemen : As you know, all producers of steel use a uniform 
basis in making sales. Everything is based on Pittsburgh prices 
139378—19 1 



98 

and freight rate. This is an unfair method to the business interest 
of the country. 

Judge Gary, of tlie United States Steel Corporation, in his state- 
ment before your Commission, admitted that Birmingham could 
produce iron and steel as cheap as any place in the country; in fact, 
we believe it is a well-known and established fact that steel can 
be produced cheaper in Birmingham than in Pittsburgh or any other 
place in the country. That being the case, territory located so that 
it would naturally buy from Birmingham is forced to pay the same 
prices as they would p^j if buying from Pittsburgh. 

Now, if each zone in which steel is produced would make its 
own prices, would tend to build up each section, and would stimu- 
late competition in business, and which will be impossible at pres- 
ent, there really is no competition in prices for the system itself 
completely stifles competition. Furthermore, the consumers of the 
country suffer because they have to pay in the end fictitious Pitts- 
burgh freight rates, and this is true in buying abnost any agricul- 
tural implements. It is therefore unfair and unjust, and we wish 
to enter our protest most vigorously against any such unfair and 
sectional system. 

If this system were applied to all other interests you can readily 
see what would be the effect on the country. In fact, there is too 
much of it now, and has a good deal to do, in our opinion, with the 
present high cost of everything. 
Yours truly, 

Salem Ikon Works. 

STATEMENT OF LOMBARD IRON WORKS & SUPPLY CO. 

Attgusta, Ga., August 28. 1919. 
The Federal Trade Co^imissiox, 

Washington, D. C. 
Gentlemen": We are very much interested in the effort being- 
made to have Birmingham made a basing point for iron and steel 
articles the same as Pittsbui'gh. We understand that Birmingham 
is in position to manufacture steel as cheaply as Pittsburgh. There- 
fore we do not see wh}'- southern industries should not be able to buy 
steel products on Birmingham basis. We do not understand why 
southern industries should not be placed on the same basis as their 
northern and eastern competitors. We hope that the effort being 
made for Birmingham to be made a basing point will meet with 
your favorable recommendation. 
Youi's truly, 

J. G. Belding, 
■ Secretary. 



99 

STATEMENT OF RIDDELL BROS. (INC.). 

Atlanta, Ga., August SO, 1919. 
The Federal Trade Commission, 

Washington, D. C. 
Gentlemen: We have been aware that application was made to 
your Commisison for a hearing of southern steel users with a view 
of having action to change the present basis so as to eliminate the 
injustice which is done southern users of steel by the present method, 
but have not as yet written you regarding it as we considered that the 
injustice of the present basis was so obvious that it would not be 
necessary to burden your files with letters advocating the change. 

However, as it is apparent that those of us who are in favor of 
the change petitioned for should make our desires known, we take 
occasion to ask that our name be added to those who desire that a 
change should be made so that Birmingham be made a basing point 
as well as Chicago. 

We trust that the matter will appeal to your honorable body as 
being absolutely necessary and that favorable action will be forth- 
coming. 

Very truly yours, 

EiDDELL Bros. (Inc.), 
Per C. F. RiDDELL, 

Secretary. 

STATEMENT OF OSCAR DANIELS CO. 

Tampa, Fla., August 29, 1919. 
Federal Trade Commission, / 

Washington, B.C. 

Genilemkn : We desire to call your attention to the maimer in 
which southern shipbuilders are being discriminated against in the 
matter of prices on steel owii)g to the fact that the freight ditfer- 
ential between Pittsburgh and Birmingham, or a portion of it, is 
added to the Pittsburgh base price for all steel emanating from the 
Birmingham district. 

We at the present time have a contract with the Shipping Board 
for 10 steel ships for which over 30,000 tons of steel were required. 
In billing all steel rolled in the Birmingham district the freight dif- 
ferential between Pittsburgh and Birmingham was added to the base 
price. This amounted to between $6 and $6.50 per ton on about 15,000 
tons of material which was rolled in the Birmingham district. 

You can readily see that in competition with shipyards in the east- 
ern district the southern shipbuilder would be handicapped to the ex- 
tent of this differential. 



100 

We have recently had occasion to get some quotations on steel both 
from Birmingham district and Pittsburgh district. The quotations 
from the Birmingham district on beams were $3 a ton lower f. o. b. 
Tampa than the Pittsburgh quotation, on plates $3.30 per ton, on bars 
$3.50 a ton lower. The freight differential between these two places 
is $6 a ton on shapes and $6.36 on plates, exclusive of war tax. It is 
therefore evident that the price of steel on the basis of these prices 
is about $3 higher f. o. b. Birmingham than f. o. b. Pittsburgh, and 
therefore adds this amount to the cost of building ships in the south- 
ern district. 

The establishment of a base price for steel emanating in the Bir- 
mingham district same as that emanating from the Pittsburgh dis- 
trict would place the southern shipbuilders on the equal competitive 
footing with the shipbuilders in the eastern district, and the estab- 
lishment of such a base rate would work no hardship upon the steel 
manufacturers, as the cost of steel fabrication in the Birmingham 
district is lower that that in the Pittsburgh district. 
Very truly yours, 

Oscar Daniels Co., 
By Charles L. Ortenfeldt, 

Chief Kngineer. 

STATEMENT OF ATHENS FOUNDRY & MACHINE WORKS. 

Athens, Ga., August 30, 1919. 
To the Federal Trade Commission, 

Washington, D. C. 

Gentijsmen: In reading the application of the Western Associa- 
tion of Rolled Steel Consumers for complaint against the United 
States Steel Corporation and others we feel that a great injustice is 
being done the manufacturers of the South in that we have to base 
our prices on Pittsburgh, Pa., instead of some southern point, 
whereas if the South could have a basing point, say at Birmingham, 
Ala., and the West at Chicago, we would save $6.20 per ton, which 
would then allow us to compete with eastern manufacturers not only 
in our own city, but would allow us to reach out uito other fields. 

As it now stands, with Pittsburgh as a basing point, we can not 
compete with the eastern manufacturers in our own city, all due 
solely to the difference in base price, which is based on Pittsburgh, 
Pa., at a difference of freight rate of $6.20 per ton. 

We, being a small concern, would use only about 100 tons per year, 
but the dift'erence between being based on Birmingham, Ala., and 
based on Pittsburgh freight rates would be enough to pay 5 per 
cent on our capital. 



101 

We feel that your Commission should grant the application and 
should establish at least three basing points for rolled steel, say one 
at Pittsburgh for the East and North, one at Chicago for the West 
and North, and one at Birmingham for the South and West. 
Thanking you for considering, we are, 
Yours truly, 

Athens Foundry & Machine Works, 
By O. H. Arnold, Jr., 
: President and General Manager. 

STATEMENT OF THE WAR DEPARTMENT. 

Purchase, Storage, ajstd Traffic Division, 

Washington, Septeniber 3, 1919. 
Federal, Trade Commission, 

Washington, D. G. 
Gentlemen : Your communication of July 29 addressed to the 
honorable Secretary of War in regard to an application received 
from the Western Association of Eolled Steel Consumers relative to 
the practice of selling rolled steel on a Pittsburgh basing-point basis 
has been referred to me for reply. 

You are advised that the War Department disapproves of any pro- 
cedure in the purchase of commodities which to the normal and rea- 
sonable price of the commodity adds an item of expense forming no 
part of the cost of production • and is over and above a reasonable 
profit on the cost of production, such increase being added for the 
purpose of equalizing prices in various territories. The War Depart- 
ment, whenever practicable to do so, will buy its steel f. o. b. factory 
or f. o. b. destination, and desires that the general i^rinciple of the 
War Department business procedure be recognized in any conclusion 
you may come to in regard to the determination of basing points. 
Eespectfully, 

G50. W. Burr, 
Major General, Assistant Chief of Staff, 

Director of Purchase, Storage, and 

Traffic Division, General Staff. 

STATEMENT OF SOUTHERN IRON & EQUIPMENT CO. 

Atlanta, Ga., Septeniber 2, 1919. 
Hon. Victor Murdock, 

Acting Chairman Federal Trade Commission, 

Washington, D. C. 
Dear Sir : We are pleased to note the action being taken by vari- 
ous associations protesting against the practice of basing all rolled 
steel products on Pittsburgh freight rates. This is a practice of dis- 
crimination of long standing and one that has tended to keep the 



102 

South out of its proper place in the manufacturing world. We iare 
now paying for steel products at a price based on a 59-cent rate car- 
load from Pittsburgh, and for less than carload 74 cents, whereas the 
actual freight from Birmingham is only 19 cents carload and 25 cents 
less than carload. 

In other words, we are being penalized something like $9,000 or 
$10,000 a year because we do not live near Pittsburgh. It is a known 
fact, however, substantiated, I believe, by reports made by the Steel 
Corporation, that iron and steel products can be made much cheaper 
at Birmingham than they can in the eastern district. It is manifestly 
unfair, therefore, that the South should suffer from these unreason- 
able prices. 

Yours very truly, 

Southern Iron & Equipment Co., 
By A. J. Merrill. 

STATEMENT OF J. S. SCHOEIELD'S SONS CO. 

Macon, Ga., September 2, 1919. 
Mr. W. E. Dunk, Jr., 

Secretary Southern Metal Trades Association, 

Candler Building, Atlanta, Ga. 

Dear Sir: Within the past few days our companj?^ has received 
considerable literature on the subject of " Pittsburgh basing prices." 

A most pei-nicious and inflicting injustice imposed on all buyers of 
steel and iron products from whatever quarter has been this arbitrary 
method of pricing bj' the steel companies of their manufactured arti- 
cles to the southern buyer. 

We have often made contention for a changed condition and as 
well have frequently conferred with others in our line of manufac- 
ture to exert concerted effort to relieve us from this burden, but to 
no avail has been our plea. 

The many thousands of toll southern manufacturers have paid in 
the years gone by in the purchase of such goods is well-nigh in- 
calculable. 'Where Birmingham and Knoxville and Richmond and 
Anniston and Sheffield and Bessemer are so near us, what sane ex- 
cuse is there for our having to pay a rate of freight from Pittsburgh ? 

Without a comprehensive and careful tabulation of our own ton- 
nage bought within the last few years, we may safel}' state that this 
excess we have paid on at least 1,500 to 2,000 tons yearly average. 
Combine the aggregate of all southern purchasers and see the un- 
justice premium which has been exacted. 

An immediate demand from high authority should at once destroy 
this vicious tax and such profiteering be made to cease instantly. 
Yours truly, 

J. S. Schofield's Sons Co., 

'^ A, D, SCHOFIELD. 



103 

STATEMENT CAROLINA WHOLESALE HARDWARE CO. 

Columbia, S. C, September 3, 1919. 
Fedekal Trade Commission, i 

Washington, D. C. 

Gentlemen : We wish to call your attention to the custom of the 
Pittsburgh base price being quoted on all rolled steel, rails, etc. 

This practice practically avoids the natural territorial advantages 
in manufacture at other producing points throughout the country, 
and forces the jobber and consumer adjacent to other manufacturing 
points to pay the higher by paying on the customary Pittsburgh 
bases. 

We wish to earnestly protest against this practice and wish very 
earnestly that your body will promulgate such rules and regulations 
as will cause the abolition of this Pittsburgh plus price custom. 

Thanking you in advance for your consideration of this matter, 
we are. 

Yours very truly, 

Carolina Wholesale Hardware Co., 
PerE. G. Jones. 

STATEMENT OF THE JOHNSON IRON WORKS (LTD.). 

New Orleans, La., September 2, 1919. 
Federal Trade Commission, 

Washington., D. C. 

Gentlemen : In acknowledging receipt of your letter dated Aug- 
ust 25, with which you inclosed copy of Rolled Steel Consumers 
application for a complaint against the United States Steel Cor- 
poration and others, and which application is addressed to the 
Federal Trade Commission, regret to state that our experience and 
knowledge of this matter prevents our making anj' suggestions that 
we might consider competent. 

We would like, however, to cite one instance in our very recent 
experience which appeared to us to be a rather arbitrary and un- 
reasonable procedure because of prior experiences in shipments to 
us having been on a different basis. 

In March, 1918, we obtained contract No. 198-SC. with the Emer- 
gency Fleet Corporation for the construction of six steel hull harbor 
tugboats. 

This contract provided that the Emergency Fleet Corporation 
should allocate our order for steel with the mills that they might 
choose, and that the cost of the steel and the freight would be de- 
ducted from the lump amount which they owed us on the entire 
contract. 

We requested them to place our order preferably Avith the Ten- 
nessee Coal, Iron & Railroad Co. because it was located at Birming- 



104 

ham, Ala., and from which point we, therefore, concluded our freight 
charge would be less than were the order placed with any other mill. 
The,y placed the larger portion of our order with the Tennessee 
Coal, Iron & Railroad Co., Birmingham, Ala., but the freight rate 
that they charged us was 22 cents per 100 pounds, whereas the 
freight rate from Birmingham, Ala., to New Orleans, La., is 16i 
cents per 100 pounds, and the freight rate from Pittsburgh to jSTew 
Orleans, La., is 38^ cents per 100 pounds. 

It therefore occurs to us, because of our own interest in the matter, 
that there should be no arbitrary rate base and that rate in all cases 
should be from the point of actual shipment to destination. 
Very truly yours, 

The JoHNSOJsr Iron Wokks (Ltd.), 
Warren Johnson, Manager. 

STATEMENT OF VALK & MUKDOCH CO. 

Charleston, S. C, Septeniber 2, 1919. 
Federal Trade Commission, 

Washington., D. C. 
Dear Sirs : AVe are writing to call your attention to the discrimi- 
nation against southern manufacturers by basing steel prices on 
Pittsburgh rate, soliciting your aid and investigation. 

We feel that we are greatly handicapped in this matter and that 
this rate should be abolished, allowing us to pay established rates 
from shipping point only. The present rate allows eastern manu- 
facturers to underbid us, particularly in near-by markets. In other 
<vords, a bidder near Pittsburgh can sell in our territory, while we 
are excluded. 

Soliciting your kind consideration, we are, 
Very truly yours, 

V^VLK & Murdoch Co. 

STATEMENT OF BIRMINGHAM STEEL CORPORATION. 

Birmingham, Ala., Septeniber 4, 1919. 
Federal Trade Commission, 

Washington, D. C. 
Gentlemen: In common with all consumers of steel outside of 
Pittsburgh, Pa., we are extremely desirous of seeing the iniquitous 
" Pittsburgh-plus " system of fixing steel prices abolished. The need 
for and the desirability of the " Pittsburgh-plus " system no longer 
exists, but apparently the practice, which has now become unfair 
and discriminatory, will not be voluntarily abandoned by the mills. 



105 

Our plant is one of the largest steel fabricating plants in the coun- 
try and is located in the cheapest iron-producing center in the United 
States, but we are finding our size to be only a handicap and our 
location to be of practically^ no advantage, because of unfavorable 
freight rates, inability to get '" fabrication-in-transit " privileges, and 
the " Pittsburgh-plus " system of establishing steel prices. 

Without dwelling at this time on the first two mentioned disad- 
vantages, although their remo'^'al is even more vital to us than the 
last, since they narrowly limit the section in which we can success- 
fully compete, we Avant to point out the actual cost to the public and 
to ourselves entailed by the " Pittsburgh-plus " system. 

Having been in operation but a few months, and during that time 
engaged entirely in ship AvorK, we are unable to turn to our books for 
the actual figures involved, but we have carefully compiled the fol- 
lowing estimate, based on our annual capacity of 40,000 tons. 

On- 15,000 tons from local mills (only Pittsburgh base plus 15 cents 
per hundredweight is charged locally instead of full Pittsburgh 
plus"), at $3 per ton ^ $45,000 

On 10,000 tons from local warehouses (full freight of 57} cents per 
hundredweight is added, together with usual warehousing charge), 
at $11.50 per ton 115, 000 

10,000 tons from Chicago and Cleveland warehouses (an average of 
15 cents per hundredweight being added in addition to warehousing 
charges), at $3 per ton 30,000 

5,000 tons from Chicago, Cleveland, and other mills (an average saving 
in freight of 5 cents per hundredweight), at $1 i^er ton 5,000 

Total $195,000 

This figure of $195,000 represents practically exclusively a tax on 
the consumer, which would be saved to him if the " Pittsbui-gh plus " 
system were abolished. This saving to the consumer would be almost 
entirely at the expense of the mills, it is true, but the mills would 
seem to have no right, in fairness, to retain a saving in freight to 
Avhich the consumer is entitled. 

At the present time particularly, when all building materials are 
so high as to discourage needed building, the abandonment of the 
"Pittsburgh plus" system seems to be a step forward in restoring 
normal conditions and lowering the " high cost of living." 

Putting Birmingham on a paritj' with Pittsburgh as a basing point 
Avould, of course, extend bv several hundred miles in nearlv all direc- 
tions the section in which Ave can compete, particularly in the South- 
west, where the freight rates from Pittsburgh are no higher than 
the rates from Birmingham. This should enable this company to 
take on a larger volume of business and to operate its plant at a 
reasonable profit. 

Yours very truly, 

M. AENOiiD, Purchasing Agent. 



106 

STATEMENT OP MONTGOMERY COAL WASHING & MANTTFACTTJB,- 

ING CO. (INC.). 

Birmingham, Ala., Seftemter <§, 1919. 
Federal Trade Commission, 

Washington, D. C. 
Gektlemex : We regret very much that it becomes necessary for 
the manufacturers of steel products of the Birmingham district to 
protest against the discrimination in favor of the eastern market, 
especially in the fixing of prices of steel. 

It has for years been the custom of our steel producers in this 

J district to take the Pittsburgh jjrices f . o. b. Birmingham as a basis 

for their prices of steel, notAvithstanding the fact that steel can be 

produced in the Birmingham district approximately 30 per cent 

cheaper than in the Pittsburgh district. 

We would like to ask what good reason can be given why Ave 
should not buy our Alabama products at the same price as that quoted 
in Pittsburgh without the freight being added, or any portion 
thereof. 

Yours very truly, 

Montgomery Coal Washing & Manufacturing Co., 
Jas. a. Montgomery, President. 

STATEMENT OF WHITE HICKORY WAGON MANUFACTURING CO. 

Atlanta, Ga., Seftemher P, 1919. 
Hon. Victor Murdock, 

Acting Chairmcm, Federal Trade Commission, 

Washington, D. G. 

Dear Sir : We learn from the newspapers that the Western Asso- 
ciation of Rolled Steel Consumers has filed a complaint with the 
Federal Trade Commission against the United States Steel Corpora- 
tion and others in an effort to stop the practice of selling rolled steel 
on the basis of Pittsburgh freight rates. 

We wish to indorse this complaint of the Western Association of 
Eolled Steel Consumers, and to urge the correction of this injustice 
to consumers of this product not only in the West but also those 
in the Southeast. 

We use a large quantity of both steel and iron bars in the manu- 
facture of our product, and although our entire supply comes from 
Birmingham, where the freight to our factory is only 19 cents per 
hundred, we are taxed with the freight from Pittsbui-gh, which is 
about 52 cents per hundred. Our northern and western competitors 
buying their steel and iron from Pittsburgh, or mills closer to them, 
are not subjected to this unjust tax. 



107 

In the history of this country we question whether there was ever 
a more corrupt or unjust method of business practice, and a few 
years ago for the same offense the Government was threatening to 
send such people to the penitentiary. 

We hope that your honorable Board will see the injustice of such 
practice on the part of the steel manufactui-ers, and correct it if it 
lies within your power to do so. 
Very truly, 

White Hickory Wagon Manufacturing Co.. 
PerB. M. Blount, President. 

STATEMENT OF PERFECTION MATTRESS & SPRING CO. 

Birmingham, Ala., September 9, 1919. 
Federal Trade Commission, 

Washington^ D. C. 
Sirs : This corporation along with hundreds of other manufac- 
turing concerns in the Birmingham district have so long labored 
under trade disadvantages of the Pittsburgh plus plan of price fixing 
that it is now protesting against this unjust discrimination. 

The manufacturers in the Birmingham and southern district are 
not securing the advantages that we should have by reason of our 
proximity to raw materials. We are large consumers of wire, steel, 
and iron, using hundreds of tons a year, and by reason of this un- 
reasonable inequalitj^ our loss runs into the thousands of dollars 
yearly. 

Agencies representing us are making this protest, and this letter 
is sent with the hope that it will help you come to the conclusion that 
we are unjustl}^ discriminated against, and that when you know the 
real facts you will not fail to give us the relief asked for. 
Eespectfully yours, 

Perfection Mattress & Spring Co., 
F. M. Jackson, President. 

STATEMENT OF STEWARD-HILTY MACHINE CO. 

Birmingham, Ala., Seftember 20, 1919. 
Federal Trade Commission, 

Washington, D. C. 
Gentlemen : We indorse the application of the Birmingham Civic 
Association for a complaint against the " Pittsburgh plus " method 
of price fixing on steel manufactured and sold in this district. 
Yours very truly, 

Steward-Hilty Machine Co., 
Per Chas. R. Hilty, 

Secretary and Treasurer. 



108 

STATEMENT 01" CRESCENT BED CO. (LTD.) 

New Origans, September 18, 1919. 
The Federal Trade Commission, 

Washington, D. C . 
Dear Sirs: The Birmingham Civic Association has petitioned to 
your Commission for relief in the methods of the several steel cor- 
porations of using what is termed the " Pittsburgh plus freight 
rates." 

We heartily agree with the Birmingham Civil Association that it 
is an unfair practice for the steel companies to charge us, as a con- 
sumer of steel, a profit on freight, a commodity in which they have 
no financial interest. 

We feel that if they are willing to sell their product to a large 
percentage of their consumers at their advertised published price, 
there is no reason for them to ask us, who are located near their 
shipping point, an additional profit, especiall}'^ as we understand that 
they are able to produce their materials cheaper in the Birmingham 
district than they are in the Pittsburgli district. 

We are quite a consumer of steel, and we trust that j^ou will give 
the application of the Birmingham Civic Association due considera- 
tion and order the necessary relief. 
Yours truly. 

Crescent Bed Co. (Ltd.), 
P. Jung, Jr., Secretary. 

STATEMENT OF JOHNSON CITY EOUNDRY & MACHINE CO. (INC.). 

Johnson Cut, Tenn., Seftemher 16, 1919. 
Federal, Trade Cojimission, 

Washington, D. C. 
Gentlemen : We wish to express ourselves as strongly against the 
present basing prices of steel on the Pittsburgh basis as against 
Birmingham basis. We are small consumers of steel and are pretty 
near the central point between Birmingham and Pittsburgh, How- 
ever, our losses under the Pittsburgh basis are approximate!}' $500 
per year. 

We wish to express ourselves as being strongly in favor of the 
Birmingham basing of prices for the South and West, and sincerely 
hope that you may at the proper time see your way clear to I'elieve 
us of this injustice which we have endured for past years. 
Yours very truly, 

Johnson City Foundry & Machine Co., 
G. W. Setzer, President. 



109 

STATEMENT OF THE CASEY-HEDGES CO. (USTC). 

Chattanooga, Tenn., September 16, 1919. 
Hon. Victor Muedock, 

Acting Chairman Federal Trade Commission, 

Washington, D. C . 

Dear Sir : In your letter of July 26, 1919, addressed to the Ameri- 
can Iron and Steel Institute, statement is made that question raised 
by the Westei*n Association of Eolled Steel Consumers as to pro- 
priety of permitting Pittsburgh to be the sole basing point suggests 
that points other than Chicago and Pittsburgh may be entitled to 
consideration. Therefore our proximity to Birmingham impels us 
to action in an endeavor to present incidentally the just claims of 
our immediate section — perhaps the entire South — at least in par- 
ticular our individual interest in the controversy. 

The present method of considering Pittsburgh the exclusive basing 
point permits Birmingham to arbitrarily charge us, in addition to the 
Pittsburgh price, freight to equal rate from Pittsburgh to Chatta- 
nooga. Consequently we are handicapped in increasing degree as 
we attempt to secure a share of business in the direction of Pitts- 
burgh territory. As a matter of fact must, figuratively speaking, 
turn our back to Pittsburgh and seek trade only to the South and 
Southwest, without any advantage whatsoever that geographic loca- 
tion entitles us to; but instead, unnaturally burdened with an arti- 
ficial freight charge, permitting those industries between Pittsburgh 
and Chattanooga to start out equal Avith ourselves on a forced level 
of materials cost. Birmingham, being an important producing cen- 
ter, should be given the privileges that go with its natural endow- 
ment. If we are not misinformed, the Birmingham district has 
closer connection with its supplies of ores and fuels than the other 
centers of steel production. Birmingham should be unrestricted 
within a territorial radius on an equal basis with Pittsburgh and 
other steel centers instead of being compelled to supply the country 
only in the direction leading away from Pittsburgh. 

The bigger steel interest has what virtually amounts to a monopoly 
in the Birmingham district and may not be expected to be quite so 
jealous of its advantageous location to favor the South as would be 
looked for from strictly local investment. Therefore the southern 
consuming public must assert its birthright to benefit from the nat- 
ural bounty, and not be indirectly paying tribute to what would be 
unfairly favored sections of our country. The big interest's coffers 
are kept in the East. 

So long as our Government infl^uences the basic price of steel, it 
must equitably recognize the various important producing points as 
points of self-determination, entitling them to establish the same base 



110 

price protecting trade in all the advantages of contiguity so far as 
transportation charges are encountered. In asking this the South 
requests but its due — that it not be discriminated against ; that unfair 
conditions be rectified; and it only asks for a square deal, and not be 
disheartened in its strides to become an industrial as well as agri- 
cultural South. 

The enervating climate is a natural obstacle our labor has success- 
fully combated in the strenuous pursuits of the mill. Our plantation 
Negro has earned a place in our industrial life, and there are many 
communities of contented Negro artisans to which the South may 
point with pride — a solution of the Negro j)roblem in its natural 
environment. But this satisfactory condition may not continue if 
the South must be taxed in the guise of freight charges on its own 
natural resources of ores and fuels and be forced to give way in an 
unequal struggle to make and consume its own machinery. No ; there 
is absolutely no justification for this return to bondage that favorit- 
ism to Pittsburgh would bring about. 

We ask no favors, but do expect a chance for existence in a fair 
field, and we will then see the future refute the idea that toil is un- 
known south of the Mason and Dixon line, or that the country is to 
be eventually other than one ethnic group, powerful in its singleness 
of purpose. Our common destiny demands that the South be en- 
couraged in its industrial efforts, the only way sectionalism may be- 
come tempered. 

Yours respectfully, 

The CASEr -Hedges Co., 
Wm. W. Gfroekek, 

Auditor. 

STATEMENT OF HENDERSON SHIPBUILDING CO. (INC.). 

Mobile, Ala., Septemher 13, 1919. 
Federal Trade Commission, 

Washington, D. C. 

Gentlemen : We respectfully urge that Birmingham, Ala., be made 
a basing point for all forms of steel, which will give as low prices as 
are made at Pittsburgh. 

Under the arrangement now existing we have to pay approximately 
$3.60 per ton more for all forms of steel than we would were Bir- 
mingham made a basing point like Pittsburgh. 

We feel that this discrimination is unfair and we hope that you 
will eliminate it. 
Yours truly, 

Henderson Shipbtjildino Co. (Inc.), 
W. L. Whiting, Secretary. 



Ill 

STATEMENT OF A. M. LOCKETT & CO. (LTD.). 

New Orleans, Seftember 26, 1919. 
Federal Trade Cosimissiox, 

Washington, D. C, 

Gentlemen: We understand that in the near future your com- 
mission will meet to consider the advisability of the continuance or 
discontinuance of a single base on iron and steel prices at Pitts- 
burgh, Pa. 

This arbitrary basing discount point is entirel}'^ unfair and has no 
economical foundation, and we wish to protest vigorously against 
the continuance of the single basing discount point.' 

Birmingham, Ala., which lies only 300 miles from XeAv Orleans, 
is in position to manufacture iron and steel j)roducts at a lower 
price than mills in the Pittsburgh district, and M'e sincerely trust that 
your commission will see fit to order that Birmingham be made a 
base discount point, on at least as low a base as the citj' of Pittsburgh. 

Our conceni, as well as all other users of rolled steel products in 
this territory, has been paying tribute to manufacturers in an elabor- 
ate freight diiferential all too long, and it is hoped that if it is in the 
power of the Federal Trade Commission so to do, that they will put 
an end to this unjust and unfair discrimination against this section 
of the country. 

Yours, very truly, 

A. M. LocKETT & Co. (Ltd.) 

E. P. LoCKETT, 

Assistant Sales Manager. 

STATEMENT OF THE TAMPA SHIPBUILDING & ENGINEERING CO. 

Tampa, Fla., September 22, 1919. 
Federal Trade Commission, 

Washington, D. C. 

Gentlemen : We wish to call your attention to the conditions under 
which we labor here in the South. 

Our factory is located in Tampa. In ca,se we require material we 
order it either from Pittsburgh or Birmingham because the price is 
the same, and it does not make anj" difference if this material is 
hauled from Birmingham, or from Pittsbui-gh to Tampa. 

This condition, known as the "Pittsburgh plus" has been created 
by the Steel Corporation. All subsidiaries of this corporation are 
compelled to sell their products at the Pittsburgh base price, plus 
freight f x'om Pittsburgh to Birmingham, and this ruling of the Steel 
Corporation is inconsistent with the Clayton Act. 



112 

In 1917 we bought about 5,000 tons of steel. The freight from 
Pittsburgh to Birmingham is $12.65 per ton, and we paid therefore 
$63,300 too much, not considering that the Birmingham Mills can 
produce steel about 26 per cent cheaper than Pittsburgh. Further- 
more, this condition not only prevents us from competing with the 
North, but enables the northern fabricators to sell to our home in- 
dustries. 

Trusting this letter will be of interest to you, we beg to remain, 
Yours very truly, 

Tampa Shipbuilding & Engineering Co., 
By H. I. Stoffels, Engineer. 

STATEMENT OF THE UNION COTTON WAREHOUSE ORGANIZATION 
CORPORATION OF DELAWARE. 

Boston, Mass., Septemher 24, 1919. 
Federal Trade Commission, 

Washington, D. C. 

Gentlemen : As the Union Cotton Warehouse Corporatio'n con- 
templates the construction of a chain of cotton Avarehouses at south- 
ern points, involving the use of considerable steel tonnage, we are 
very much interested in the question of steel prices which you are 
about to investigate. According to our information, it will be im- 
material to us whether we order our steel requirements from the 
Pittsburgh or Birmingham mills as, by reason of the single base at 
Pittsburgh, prices delivered at any destination are the same as from 
other producing points. 

We have estimated that, if we could get prices at the Birmingham 
mills equal to the Pittsburgh mill prices, we would effect a saving of 
between $300,000 and $500,000 on the basis of an ultijnate aggregate 
capacity of 2,400,000 bales for our warehouses. Engineers estimate 
that 28,800,000 square feet of floor space would be involved, and that 
on the average 7 pounds of steel bars to the square foot of building 
space would be necessary. Thus, with an average discrimination in 
steel prices of $3 per ton, the tribute we would pay to tlie single-base 
system would not be less than $300,000. 

Our understanding is that steel production at Birmingham costs 
less than at Pittsburgh, and, if so, we see no reason why, if open 
competition existed, southern consumers of steel should not be en- 
titled to the prices related to their distance from Birmingham, in- 
stead of aibitrarily being subjected to the penalty of the fictitious 
freight rate from Pittsburgh. 

Yours very truly, Rurus E. Wilson, 

President. 



113 

Resolution Unanimously Adopted at the Annual Meeting of the Faemees* 
Educational and Coopeeative Union of America, Alabama Division, Held 
AT Birmingham, Septembes, 1919. 

Resolved, That the Alabama division of the Farmers' Educational and Co- 
operative Union of America in convention this day assembled does hereby pro- 
test to the Federal Trade Commission and the Congress of the United States 
against the discrimination practiced by the steel interests of America in main- 
taining the Pittsburgh single-base system of making steel prices, as the result of 
which the farmers of Alabama are compelled to pay an unjustifiable, excessive 
price for their wire fencing, nails, concrete bars, cotton ties, plows, and every 
article which they use in farm operations and which contains steel. This or- 
ganization hereby urges the Federal Trade Commission and the Congress of 
the United States to do all in their power to remove this arbitrary discrim- 
ination against their members and in favor of farmers who may be situated in 
territory tributary to Pittsburgh, and notwithstanding that steel is manufac- 
tured in the Birmingham district in the heart of the agricultural South at a ma- 
terially less cost than at Pittsburgh. 

Resolved further, That a certified copy of these resolutions be sent to the 
Federal Trade Commission at Washington. 

I, O. P. Ford, secretary-treasurer of the Farmers' Educational and Coopera- 
tive Union of America, Alabama division, hereby certify that the foregoing is 
a true and correct copy of a certain resolution adopted by said Union at its con- 
vention held in Birmingham, Ala., on the 19th day of September, 1919. 

0. P. Fobd, 
SSet retary-Treasurer. 
139378—19 8 



STATEMENTS FROM OTHERS THAN RESPONDENTS OPPOSING APPLICATIONS. 



STATEMENT OF N. & G. TAYLOR CO. 

Philadelphia, August 11^ 1919. 
Mr. Victor Murdoch, 

Acting Chairman Federal Trade Commission, 

Washington.^ D. C. 

Dear Sir: Eef erring to the application that has been filed with 
you from the Western Association of Rolled Steel Consumers for the 
issuance of a complaint by your Commission against the United 
States Steel Corporation and other steel i^roducers regarding the 
practice of selling steel on a Pittsburgh basing-point basis, we wish 
to go on record as being in favor of the present practice and opposed 
to any change from the method that has been in vogue for many 
years past of using Pittsburgh as the basing point. 

We are independent manufacturers, located outside the Pittsburgh 
district, and firmly believe that the disadvantages of any change from 
the present system would greatly outweigh any benefit that might 
be derived by abandoning Pittsburgh as a basing point. The gen- 
erally accepted method of using Pittsburgh as the basing point has 
been of great benefit to the trade by standardizing prices and greatly 
simplifying the details of buying and selling. 

The Pitsburgh basing plan is not obligatory upon anyone, and 
if a local mill desires to make special quotations to near-by users 
that is their privilege. 

To abandon this uniform price-basing plan would bring about 
far-reaching complications and difficulties. 

We are strongly opposed, therefore, to any change in the present 
practice. 

Very truly yours, 

K & G. Tatlor Co., (Inc.) 
H. N. Taylor, President. 

Philadelphia, Septemher 15, 1919. 
Federal Trade Commission, 

Washington, D. C. 
Dear Sirs : Our attention has been drawn to a statement submitted 
to you by the Weirton Steel Co., of Weirton, W. Va., on the subject 
of the importance of preserving Pittsburgh as a basing point. We 
would like to say that this statement has our unqualified indorsement, 
and that we are in favor of Pittsburgh being continued as a basing 

(114) 



115 

point, and we believe that any deviation from this established al*- 
rangement would end in confusion and hardship in our industry. 
Very truly yours, 

N. & G. Tatlor Co., 
W. W. Justice, Jr., 

Vice President 

STATEMENT OF GULF STATES STEEL CO. 

Birmingham, Ala., August 13, 1919. 
Hon. W. B. CoLVER, 

Chairman Federal Trade Commission, Washington, D. C. 

Sir: In reply to the request of the Federal Trade Commission 
through the newspapers that parties interested should submit a 
brief on this subject prior to September 1, I have the honor to state 
my views as follows : 

The demand of the Civic Association of Birmingham that manu- 
factured steel should be sold in Birmingham at Pittsburgh flat 
prices is entirely unjust and improvident, unnecessary, and based 
upon assumptions and a lack of correct information. I oppose such 
request, and have heretofore notified the secretary of said Civic 
Association that I was willing to appear before his committee or 
board of directors and discuss the subject with it or them, to which 
proposal I never received any reply whatever, and believe that said 
request of said association is not representative of requirements or 
desires of consumers of steel in the Birmingham district. 

I state unequivocally that the Gulf States Steel Co., of which I am 
president, has not received (and is not now receiving) any complaints 
within the past two or three years from its customers as to the parity 
of its prices with Pittsburgh and other producing centers. The main- 
tenance of a base rate in Birmingham of 15 cents per 100 pounds on 
bars appears to be entirely satisfactory to the fabricators of the 
Birmingham district. 

I append to this brief a statement, marked "Exhibit A," showing 
that at the present base rate a fabricating plant in Birmingham can 
pay the 15 cents per 100 pounds extra price now charged by us and 
will then have an advantage, cost and freight, over a competitor in 
Pittsburgh who may have bought at the flat Pittsburgh basis in mak- 
ing delivered prices at Birmingham, Memphis, Nashville, Chatta- 
nooga, Atlanta, Savannah, Jacksonville, Pensacola, Mobile, Mont- 
gomery, New Orleans, Shreveport, Meridian, Jackson, and Vicksburg. 

I charge, therefore, that the lack of information on the part of the 
Civic Association in Birmingham is shown in that it contrasts the 
business situation of the Birmingham consumer of steel competing 
for business in the Southern States with the position of a competitor 
in Pittsburgh, disregarding altogether the preferential position oc- 



116 

Gtipied by the Birmingham producer by reason of his greater prox- 
imity to the ultimate consumers. 

Assuming that there were no steel works in Alabama, and that all 
steel must be shipped into this State from Pittsburgh, the price would 
be Pittsburgh plus freiglit. If it were proposed to establish a steel 
works in Birmingham and the right to produce and sell steel here 
should be coupled with the obligation to sell at the cost of produc- 
tion not exceeding the cost in Pittsburgh, what inducement would 
there be to establish such works ? Even if the cost of production were 
as low as in Pittsburgh, and the Birmingham producer should charge 
the equivalent of Pittsburgh price j)lus freight, the Birmingham con- 
sumer would not be prejudiced, he would not be injured, he would 
be paying the same price that he was before, but would have the ad- 
vantage of a producer at his door who would relieve him from invest- 
ing capital and carrying stocks, and would give him prompt delivery 
to suit his exact requirements at a moment's notice. What moral 
ground has the Civic Association on which to demand that the 
builder of steel works in the Birmingham district shall forego and 
relinquish any advantage that he has obtained by the location of his 
works in a consuming district and hand over that advantage to some 
consumer who has not taken perhaps 1 per cent of the risks or invested 
1 per cent of the capital of the steel producer itself. I submit that 
the demand is nothing less than an arbitrary one to take accrued ad- 
vantage from one who is a producer and hand it to one who is a con- 
sumer and who has not made the demand himself, but is satisfied with 
his present situation. 

The idea that the Birmingham district can produce more cheaply 
and sell more cheaply than any other in the United States is errone- 
ous and based upon traditions or in some cases facts which have 
ceased to exist owing to changed conditions. 

In the early days of Birmingham 50 per cent ores were mined from 
the outcrop by handwork and transported on an average freight rate 
of 12^ cents per ton of 2,240 pounds to blast furnaces within the 
Birmingham zone. To-day those rich, soft outcrops have been en- 
tirely exhausted and the hard ore is followed in some cases as deeply 
as to the sea level or far below it ; and the district is dependent upon 
ore which does not exceed 36 per cent metallic iron; is hard; re- 
quires mining with power equipment, single installations costing in 
some cases from one-half to three-quarters of a million dollars, and 
after production subject to a freight rate of 50 cents per short ton of 
2,000 pounds. 

The best quality of coking coal in the district — the Pratt seam— has 
been very largely depleted, and few of the producers are able longer 
to rely upon it, but the greater part of the metallurgical fuel pro- 
duced in the district is from " big seam " coal, which requires wash- 
ing. Although the Birmingham district only produces 3 per cent of 



117 

the coal of the United States, it produces 40 per cent of the washed 
coal of the country, the washer loss running from 12 to 25 per cent, 
according to character of coal and efficiency of equipment. 

The labor of the South is notoriously less efficient physically, man 
for man, than that of the North. This is admittedly due to climatic 
conditions, which, on the other hand, permit cheaper housing, cloth- 
ing, and feeding than in the North; and in the past southern labor 
was cheaper. Now, under the strain of war, men command the same 
wages regardless of their efficiency. This is especially so with refer- 
ence to what is called unskilled labor. 

The cost accounts on file with the Federal Trade Commission show 
that the South no longer dictates to the rest of the United States 
what shall be the price of pig iron ; it is no longer able to do so. The 
Birmingham district is handicapped in its supply of scrap. It can 
not, by reason of the incidence of railroad freights, buy from distant 
northern markets and bring scrap South, but the northern consumer 
can, and does, buy southern scrap which is on its way to the market. 
A buyer in Cincinnati or Chicago or St. Louis can buy in Birming- 
ham and convert into steel at the point of ultimate consumption. If 
the Birmingham buyer tried to retaliate, he would pay freight on the 
scrap going South and again on his steel products going back North 
and could not compete. 

Thus neither in coal, coke, ore, pig iron, scrap, or labor is the 
Birmingham producer in any way helped or advantaged over his 
northern competitor. The only single advantage that he has is that 
he is nearer to his market if he desires to confine himself to the sale 
of his products in the southern zone, and this sole advantage the 
Civic Association of Birmingham would ask the Federal Trade 
Commission to take from him and put him out of business. 

The Gulf State Steel Co. is a manufacturer not only of bars, but 
also wire products. The three producers in the South — the American 
Steel & Wire Co., of Birmingham; the Gulf States Steel Co., of 
Gadsden ; and the Atlantic Steel Co., of Atlanta — all sell their wire 
products at Pittsburgh prices plus freight. The absolute justice of 
this course has been already submitted in the observations on 
bars. The sale of the two products, however, is decidedly different. 
The consumers of bars are comparatively few and far between. 
Apart from the usual village blacksmith, there is only here and there 
an engineering or fabricating plant throughout the entire South, 
and the sales to those can be conducted easily and cheaply. Wire 
products, however, including wire nails, which are used by every 
carpenter; barbed wire, woven fence, and bale ties, which are used 
by practically every farmer; and plain wire for bed springs and 
numerous manufacturing specialties are handled by every hardware 
merchant throughout the South, and the customers upon the books 
^re numbered not by units, but by hundreds, and the traveling sale^- 



118 

men necessary and the volume of correspondence and the telegraph- 
ing and telephoning in handling the sales is voluminous and costly. 

At the present time the Pittsburgh basis is well understood and is 
thoroughly acceptable to the trade at large. At one time there was 
an effort made to establish a separate Birmingham base for wire 
products. It immediately brought swarms of complaints to our com- 
pany from the jobbers in various cities. A man in Atlanta would 
complain that we were giving an advantage to the Birmingham 
jobber over himself in that the Birmingham jobber, for instance, could 
sell to Anniston more cheaply than he, the Atlanta jobber ; and similar 
complaints from our customers in Nashville, Memphis, Montgomery, 
and elsewhere. Since the adoption of the uniform Pittsburgh basis 
all these complaints have' ceased. The difference in the freight rates 
is so small from Pittsburgh to the various towns in and through Ala- 
bama that they are all practically laiown and understood and ac- 
cepted on relative basis. If the Pittsburgh basis should be abolished 
and the Birmingham basis substituted, how could business be done on 
the frontier line of an area lying between these two basing points? 
Every traveler would reach an intermediate town and endeavor to 
acquire information as to competitive quotations made from other 
districts and would be unable to make his own quotation until he 
gathered such information, telegraphed or phoned it to his house, and 
received instructions. The business is done by traveling men almost 
exclusively, of whom there are scores representing the various pro- 
ducers of wire traveling through the South. Their movements would 
be delayed, their traveling expenses greatly increased both for hotel 
bills and telegrams, and the increased cost of distribution, which is 
to-day approximately $2 per ton, would probably be doubled, and 
whatever the increased cost of selling, it must obviously be passed on 
to the consumer, who would thus have all to lose and nothing to gain. 

In addition to the above observations, which are all of a more or 
less concrete character, I respectfully submit the following remarks, 
which are more general and intended to meet the wishes of the 
Federal Trade Commission and serve it with suitable suggestions : 

Business enterprises are worse than useless to the communities in 
which they are located unless they are successful because their failure 
brings discredit on the locality. 

Good management involves caring for the interests of the enter- 
prise primarily and not being diverted from that consideration by 
others which are collateral or subsidiary, such as the advantage of 
other towns or other business enterprises. 

A steel business can not to-day be successful unless it is integrated, 
and this involves great expenditures of money for the acquisition and 
development of mineral lands, coal mines, coke ovens, ore mines, 
blast furnaces, steel works, and finishing departments. At this writ- 
ing the property account of this company stands at approximately 



119 

• 

$15,000,000, and the interest on purchase money, together with ac- 
cruing taxation on such large investment, is a large factor in the 
manufacturing cost. To earn an adequate return upon such large 
investments it is necessary to produce heavy tonnage. 

To dispose of this tonnage involves selling in markets both near 
and afar. Some of these markets are more desirable and others less 
desirable, according to their distance, the amount of freight payable 
to reach them, and the amount of competition existing there. 

A good management, to insure success, must use all the markets, 
good and poor, hoping to establish a reasonable average of net selling 
prices. If business is restricted to the markets with low freight or 
little competition, the tonnage will be inadequate to keep the works 
in full operation and the result Avill be failure. 

In a strict sense, there is no basing point in the steel trade, although 
the largest production is in the Pittsburgh district and the greatest 
amount of competition comes on Pittsburgh products, and in many 
cases it is necessary to meet the prices made by Pittsburgh producers 
plus their freight. In other cases Birmingham district steel products 
must meet Colorado plus freight; in others, Ironton, Ohio, plus 
freight; in others, Youngstown, plus freight. The Birmingham 
steel industry, to be successful and to be operated fully and to be 
useful to the community, must meet these various zones of competi- 
tion, making its purchases in the cheapest markets and its sales in the 
best ones consistent with competition. 

There is no reason why Birmingham producers should be re- 
quested to sell at Pittsburgh prices. Their ore is leaner, the coal is 
thinner, and the labor is less efficient. Pittsburgh steel works use 
Lake ores 50 to 60 per cent, against Birmingham 36 per cent, and 
have excellent coal 6 to 7 feet thick against Birmingham average 
3 feet 6 [inches] . 

Birmingham producers are prejudiced and discriminated against 
by recent freight advances on raw materials because a larger bulk 
is used in the Birmingham district to the ton of iron than in the 
Pittsburgh district. 

The skilled steel workers with their families reside in the North, 
and Negro labor is not as skilled and as efficient as the northern 
labor, which has had long training. 

The South is sparsely populated; the North is densely populated 
and full of consuming centers close together. These centers are far 
from the Birmingham district, involving heavy freight charges. 

The history of the iron trade of the South has been one more of 
failure than of success. For every blast furnace running in Ala- 
bama to-day two have failed financially in an effort to compete in 
the North. It is therefore necessary to seek southern markets not 
only for pig iron, but also for rails, billets, plates, wire, bars, cotton 



120 

ties, etc. This involves selling in the southern tier of States, also 
the Southwest, and foreign countries to be reached by South Atlantic 
or Gulf ports. 

In such trade the Birmingham district producers have a freight 
advantage over Pittsburgh, Chicago, Ironton, or Colorado producers 
which offsets the occasional loss of profit where it is necessary to 
ship goods northbound. 

Any request that Birmingham producers should arbitrarily under- 
take to sell to Birmingham consum^ers either at Pittsburgh, Chicago, 
Ironton, or Colorado prices is a request arbitrary in its nature and 
an interference with the right of every man to buy and sell to best 
advantage in his natural markets. 

In conclusion I respectfully submit this to the Federal Trade 
Commission as a matter of common fairness and right. My com- 
pany has millions of dollars invested in this district and is striving 
earnestly to make a living. We are supplying bars to-day to con- 
sumers in Birmingham at an actual loss, cash out of pocket. We 
are not receiving the slightest complaint from any of those consum- 
ers. Those consumers at our price are able to undersell in any 
southern city any Pittsburgh producer at the Pittsburgh base price 
plus freight fi'om Pittsburgh to such southern city. Why should 
we be asked by an outside organization, which has no interest in the 
matter, to make a lower price than we are now making? Under the 
conditions now existing we are not earning any dividends on our 
common stock ; we are not earning any surplus money for investment 
in improvements, which we greatly need in the business to enlarge 
the resources of the district. 

Those resources at present are being largely frittered away, as 
they have been for 30 j^ears, by skimming the best of the materials 
and shipping them away to far-distant markets in some semifinished 
form. It is to the highest interest of the Birmingham district that 
there should be not one or two producers of fmished forms of steel, 
but half a dozen, at least, in active competition with each other. No 
one to-day can go into the production of finished forms of steel 
without very large investments both in mineral lands and in operat- 
ing works, so as to be thoroughly integrated. What inducement is 
there to raise the large capital required for such investments if as a 
matter of public policy the producers of the district are to be called 
upon to sell at the production costs of an old, well-established, very 
wealthy district with every possible improvement for labor and fuel 
economy already in effect? The proposal is not even logical. It 
seeks to take any advantage of location away from A, B. and hand it 
over to C. D., without recognizing that the selfsame argument would 
suffice in turn to take away the advantage from C. P, and give it to 
E. F., and then C. D. would be no better off. 



121 

The inevitable tendency of such a proposition would be that A, B., 
having already made such large capital commitments, would go a 
step further, or two steps further, and would itself provide the 
works of C. D., and E. F., and thus the effort to deny a reasonable 
profit to A. B. would lead to the creation of a monopoly, which is 
against public policy. 

It is therefore respectfully submitted that so long as there is no 
combination or any other illegal action under the antitrust law or the 
Clayton Law, so long as there is nothing unfair and our corporation 
is operating in pursuance of law, filing its cost accounts with the 
Federal Trade Commission, competing in the open markets wherever 
it can find business and secure it at a profitable price, it and others 
like it should be left alone, trusting to the general laws of supply 
and demand and of competition, together with the Federal income 
tax and excess-profits tax to regulate all such matters. 

In all business it is not so much upward or downward changes 
that will make money for the operators as the assurance of stability 
of prices, so that the forces of competition may be wisely assessed 
and understood. The removal of one common basing point and the 
substitution of several removes this certainty^ and substitutes uncer- 
tainty. 

The South is a zone practically to itself. It is a long way from 
the populous consuming centers of the East and of the central West. 
The questions that may arise for the consideration of the Federal 
Trade Commission with reference to basing points there, it is respect- 
fully submitted, do not exist or arise in connection with the South. 
Yours very truly, 

Jas. Boweon, President. 
Exhibit A. 
Freight rates — Steel hars. 



To— 



Blrmmgham, Ala. 
Memphis, Teim — 

Nashville, Tenn 

Chattanooga, Tenn 

Atlanta, Ga 

Savannah, Ga 

Jacksonville, Fla... 

Pensacola, Fla 

Mobile, Ala 

Montgomery, Ala. . 
New OrleanS; La. . , 

Shreveport, La 

Merifiian, Miss 

Jackson, Miss , 

Vicksburg, Miss 



From 

Pittsburgh 

(per 100 

pounds). 



SO. 57§ 
.32 
.39 

.44 

.54 

.34i 

.34J 

.38i 

.38 J 

.57i 

■m 

.61 
.59 
.59 
.38i 



From 
Bi lining- 
ham (per 

100 
pounds). 



$0.14 

.Hi 

.12i 
.17J 

.m 

.17^ 

.16i 

.15 

.161 

.16i 

.34 

.12i 

.24 

.16i 



Difference 
in favor 
Birming- 
ham (per 

100 
pounds). 



SO. 57i 
.18 
.27i 
.31i 
.36J 
.17 
.17 
.22 
.23 J 
.41 
.22 
.27 
.46J 
.35 
.22 



Difference 
in price 
in f Ivor 
Birming- 
ham over 
Pittsburgh 
(per 100 
pounds). 



S0.42J 
.03 
.12* 
.16i 
.21i 
.02 
.02 
.07 
..08* 
.26 
.07 
.12 
.31* 
.20 
.07 



Mat 28,1919. 



122 

STATEMENT OF LACKAWAITNA STEEL CO. 

[In the matter of the application of the Western Association of Rolled Steel Consumers 
for a complaint against the United States Steel Corporation, and others.] 

Before the Federal Trade Commission. 

Lackawanna Steel Co. having received a communication from 
Hon. Victor Murdock, acting chairman of the Federal Trade Com- 
mission, dated August 20, 1919, requesting a written statement of 
the position of the company with respect to the above-mentioned 
application, does now in pursuance thereof and at the request of 
said acting chairman submit a statement of its position with regard 
thereto as follows : 

1. Lackawanna Steel Co. is engaged in the production and selling 
of steel, having a large plant therefor at Lackawanna, in the State 
of New York, just outside the city of Buffalo, and sells its products 
at various places in the United States of America and elsewhere. 
The company has been engaged in the steel business for upward of 
35 years or more; its properties have a capacity of production of 
upwards of 1,250,000 gross tons of finished rolled steel products 
per year. 

2. Lackawanna Steel Co. generally sells and since its inception 
has generally sold its steel products, such as structural shapes, plates, 
merchant bars, etc., at the market prices, plus an amount equal to the 
published tariff rate of freight on such products from Pittsburgh to 
the point of destination. The practice just described is and for many 
years has been the practice of steel manufacturers generally and is 
the growth and outcome of the natural law of supply and demand. 
So far as is laiown to this company, this has been the custom of the 
trade since the commencement of the steel industry for the reason that 
during that time the so-called Pittsburgh district has produced a 
majority of all the steel produced hj all manufacturers in the United 
States. Under this custom the company is able to quote prices to any 
point by ascertaining the amount of the published tariff rate of 
freight from Pittsburgh to that point. There have been certain ex- 
ceptions to the general rule in the experience of the company. At 
certain times when the suppl}^ has exceeded the demand, the custom 
has been more or less disregarded by all producers, but at a loss. 

3. The freight from Pittsburgh to any given locality is Neces- 
sarily an element of the market price of steel in that locality. This 
is so, not as the result of an arbitrary price system, but because of 
purely economic reasons, as follows : 

Under existing conditions it is a fact that the Pittsburgh district 
supplies a greater amount of steel than any other district. It pro- 
duces approximately 70 per cent of the whole production of the 
country. It is a further fact that the Chicago and tributary districts 



123 

do not supply a sufficient quantity of steel to meet their own require- 
ments and that a substantially larger part of the requirements of 
those districts is supplied by outside steel-producing districts, among 
which the Pittsburgh district strongly predominates. This being 
the case, the consumer in the Chicago and tributary districts must 
finally, in order to obtain his full supply, call upon the Pittsburgh 
producer and pay the price of the Pittsburgh producer. Conse- 
quently, by the operation of natural economic laws, the market price 
in the Chicago district, as well as elsewhere, is dependent upon the 
amount for which the Pittsburgh producer will sell, and that amount 
is based in part on the freight from Pittsburgh to Chicago or other 
destination. This will hold true so long as Pittsburgh continues to 
have a larger output than any other district. 

Lackawanna Steel Co., when it sells in any particular district, is 
entitled to receive the m.arket price prevailing in that district. To 
prohibit the company from receiving that price would be an in- 
justice. Consequently the Lackawanna Steel Co. is in any district 
entitled to receive a price which has for one of its elements the 
freight rate from Pittsburgh to that district. It makes no difference 
that the Lackawanna product is actually shipped from Buffalo. 
The Pittsburgh freight enters into the amount of the local market 
price, and Lackawanna is entitled to receive that price. If, in arriv- 
ing at its price for any particular locality, Lackawanna or any other 
company were obliged by this Commission, as is requested in the 
pending application, to deduct from the prevailing market price 
an amount equivalent to the freight from Pittsburgh, such company 
would receive a price determined not by market conditions but by 
the fiat of the Commission. From the foregoing it follows that so 
long as present conditions in steel production prevail a producer is 
entitled to receive in any locality a price founded upon and in part 
made up of the Pittsburgh freight rate. 

4. There are three factors in a market price for steel in any 
locality — cost plus a reasonable profit plus Pittsburgh freight. The 
first two elements would be constant in whatever locality a par- 
ticular product should be sold. The third, of course, would vai-y in 
each locality. 

If, as above argued, the freight rate from Pittsburgh is necessarily 
and economically an element in the market price in any particular 
locality, no injury can be done to anyone in alloAving the producer 
to sell on a Pittsburgh base system. 

It is true that the result of the present condition is that the pro- 
ducer sells his product at different prices in different localities, but 
this does not constitute an illegal discrimination in price, as appears 
from the language of section 2 of the Clayton Act, which section 



124 

deals with "Price discrimination," and contains the following pro- 
vision : 

Provided, That nothing herein contained shall prevent discrimination In 
price between purchasers of commodities * * * that makes only due 
allowance for difference in the cost of selling or transportation or discrimina- 
tion in price in the same or different communities made in good faith to meet 
competition. 

5. The company believes that should the existing custom be 
changed, thereby making Chicago or some place other than Pitts-. 
burgh a basing point or the sole basing point, or by compelling the 
existence of more than one basing point, it would not m.erely result 
in great confusion in the steel industry in general, but in substantial 
loss to the company, its stockholders, and employees. It is not be- 
lieved that there can be a middle ground between the present con- 
dition, on the one hand, to wit, a single basing point founded on the 
production in that district of a major portion of the steel produced 
in the United States, and, on the other hand, a condition where each 
mill has its own basing point. The immediate result of a change 
in the existing system would be the restriction of the sales of each 
company to a district in close proximity to its own mills. The result 
would be that in many parts of the country this company would be 
unable to compete or take any part in competition for local demands. 
The same is true of all other producers, and there would be in conse- 
quence a substantial reduction in competition all over the country. 

6. This company has made inquiries of some of its customers who 
are consumers of large quantities of steel, with a view to obtaining 
their views on the subject. Copies of letters from them are annexed 
to this statement and made a part hereof. 

H. D. Taylor Co., Buffalo, are jobbers of iron' and steel. 

Archbold-Brady Co., Syracuse, are engineers and contractors. 

John J. Greer & Co., Baltimore, Md., are jobbers. 

Buffalo Bolt Co., Buffalo, are manufacturers of bolts and nuts. 

Moore Drop Forging Co., Springfield, Mass., are makers of di-op 
forgings, etc. 

Beals, McCarthy & Rogers, Buffalo, are jobbers. 

The Boston Bridge Works, Boston, Mass., are fabricators of steel 
shapes, etc. 

It is also the belief of this company that the custom aforesaid 
is of very real benefit to consumers since as one result of it they 
are able to obtain the competition of a number of steel producers 
in all parts of the country. 

7. The company further submits that in the event of an order 
of this Commission merely abolishing the Pittsburgh base or merely 
decreeing a Chicago or other base without more, the only effect 
would be that the steel companies would discontinue the form of 



125 

making their prices based on Pittsburgh plus published tariff rate 
of freight, but would charge a price -vvhich would still be in fact a 
price plus published tariff rate of freight from Pittsburgh, so that 
the action of the Corn-mission would be nugatorj^ If, however, the 
Commission should go further and prohibit the consideration, as 
an element of price, of the Pittsburgh base and establish a Chicago 
or other base, it would in fact fix and establish the price of steel 
products. This the Commission has not the power to do. Even if 
the Commission did have the power so to fix the prices of steel prod- 
ucts, the result would be immediately to divorce such prices from 
the natural law of supply and demand with disastrous conse- 
quences. It might also be noted here that it is not true that in that 
event the Chicago steel fabricators could compete the world over. 
On the contrary, there would be an equalizing or neutral point be- 
yond which they would be unable to compete. Moreover, there is 
nothing to guarantee that any saving in the price of steel at Chi- 
cago, for instance, consequent on the establishment of Chicago as a 
basing point, would benefit the local consumer. On the contrary, 
the result would be that because of the loss of the competition of 
other steel manufacturers and fabricators the Chicago fabricators 
would be able to charge and maintain the same relative prices and 
that thereby the net gain to the ultimate consumer would be nil. 

8. The company further calls the attention of the Commission 
to the fact that the Commission is not in this case called upon to 
act by persons' who have in any Avay been injured by an existing 
trade practice. On the contrary, the complainants in this case and 
those Avhom they represent have not only benefited greatly under 
the existing custom, but have prospered. An investigation by the 
Commission into their affairs will disclosel the truth of the last- 
mentioned statement. If this investigation is made, it will be 
found to what great extent the complainants and those whom they 
represent have been able to prosper and to make very large profits 
under the system which they now attempt to overthrow. 

9. Lackawanna Steel Co. absolutely denies each and every alle^ 
gation in the application for the issuance of the complaint herein 
to the effect that its prices are fixed by any understanding or agTee- 
ment between the producers of steel. The company has no such 
agreement or understanding whatsoever with any other producer 
of steel. 

10. For the sake, therefore, of maintaining the natural law of 
supply and demand and to prevent the confusion which would re- 
sult from any such change in the present system as that suggested 
in the application for the issuance of a complaint, the Lackawanna 
Steel Co. states as its position with regard to the matters aforesaid 



126 

that it is able to compete with other companies in a much larger 
field under the present system; that it greatly fears the results of 
any change therein ; and it requests that a complaint be not issued 
which would have any such result. 

Respectfully submitted this 28th day of August, 1919. 

Lackawanna Steel Co., 
ByC. H. McCuLLOUGH, Jr., 

President. 



BuTFAxo, N. Y., August 22, 1919. 
Mr. C. R. Robinson, 

c/o Lackaioanna Steel Co., Buffalo. 

My Deae Mr. Robinson : We have your letter of August 19. To be perfectly 
candid we have not given the question of Pittsburgh basing but very little 
thought. The writer assumes that the jobbers' attitude on a question of this 
kind would be somewhat different than that of the manufacturer. There are 
conditions under which we would very much prefer to purchase f. o. b. mill, but 
as the steel business is at the present time and as it has been during the past 
three years, it is the writer's judgment that the Pittsburgh base is the most 
desirable from the standpoint of the distributors in this territory, and if busi- 
ness continues as it is we prefer to buy f. o. b. Pittsburgh. 
Very truly yours, 

H. D. Tayloe Co., 
Geo. C. Finley. 



Syracuse, N. Y., August 22, 1919. 
Mr. C. R. Robinson, 

Vice President Lackaioanna Steel Co., Buffalo, N. Y. 

My Dear Mr. Robinson : Yours of the 19th instant addressed for the per- 
sonal attention of Mr. Dunne arrived when he is absent on a two weeks' vaca- 
tion getting a much-needed rest. I have just returned from my vacation my- 
self, and feel a whole lot rested, although it is a little difficult to get back into 
the harness again. 

We have never had any special objection to the Pittsburgh basing as, of course, 
it was of assistance to us in western business, and if Chicago was also made 
n basing point it would be quite a handicap to us in some negotiations. Most 
of our competition originates around Pittsburgh, however, so that has not been 
so much of an argument as it might have been. 

It seems to us that if Chicago is to be made a basing point that Buffalo should 
also be, which would be somewhat to our advantage. Perhaps this suggestion 
would not particularly appeal to you, but you can see our position. 

I have not had a chance to talk with Mr. Dunne, but do not see that we would 
be greatly affected one way or the other. As a matter of fact, from our stand- 
point, I think it would be just as well if the Pittsburgh basing was left un- 
disturbed. 

As soon as Mr. Dunne has returned we will talk this question over and will 
write you further. 

With kindest regards, and hoping to have the pleasure of seeing you some 
time in the near future, I remain, 
Very truly yours, 

W. K. Archbold. 



127 

Baltimoee, August 20, 1919. 
Mr. Chaeles R. Robinson, 

Tice President Lackawanna Steel Co., Buffalo, N. Y. 
Dear Sir : Your favor of the 19tli instant at hand. Contents carefully noted. 
We are heartily in favor of " Pittsburgh basing," and trust the Federal Trade 
Commission will allow this to stand as it has been for a number of years, and 
we urgently enter our protest against this change. 
Yours very truly, 

John J. Greek & Co (Inc.), 
C. S. Dell, President. 



BrrFrAi.o, N. Y., August 18, 1919. 
Mr. C. R. Robinson, 

Vice President Lackawanna Steel Co., Buffalo, N. T. 

Dear Robbie: As you say, we know that the Pittsburgh base question is 
again to come up, and we shall do what we can to get our trade association 
to assist in maintaining the so-called Pittsburgh base. There is to be a meet- 
ing this week, and I will gladly let you know what they think about it at this 
meeting. 

We should prefer to have the Pittsburgh base maintained, particularly if it 
is maintained all the way through, including the goods we sell. We realize 
that with the Pittsburgh base it is possible for us to get into markets that it 
would be impossible for us to touch were our competitors able to buy their 
material delivered, and it would be very detrimental to us if it was maintained 
on some things and not on others ; so, taking it all in all, we are strongly in 
favor of the Pittsburgh base. 



Very truly yours. 



R. K. Albright, Vice President. 



Springfield, Mass., August 22, 1919. 
C. R. Robinson, 

Vice President Lackawanna Steel Co., Buffalo, A'. Y. 
Dear Sir : YoAir favor of the 19th instant received, and I note carefully what 
you say about the question of basing prices on steel products. We are very 
sure that the old basis, which has been in force so long, is the one that we 
would like to see continued, and I hope that some way will be found to make 
this po.«:sible. 



Yours very truly, 



A. H. Chapin, President and Treasurer. 



Buffalo, N. Y., August 22, 1919. 
Mr. Charles R. Robinson, 

Vice President Lackawanna Steel Co., Buffalo, N. Y. 

Dear Mr. Robinson : Your letter of Au.gust 19 received. 

We can not see any advantage in changing the custom of basing steel products 
f. 0. b. Pittsburgh. We feel that while there are many arguments in favor of 
having more than one basing point, we think they are outweighed by the benefits 
derived from the stabilized market based on one point. 

From experience in buying general supplies sold f. o. b. various manufacturing 
points throughout the country, we think the single basing point simplifies the 



128 

liguring of transportation costs and amounts to the same thing in the end 
because competing manufacturers invariably equalize freight. 

We do not know whether you are in favor of a change or not. If you are, 
we would be glad to know some of your reasons. 
Yours very truly, 

Beais, McCaetht & Rogers (Inc.). 
Eugene J. McCaethy, President. 



Boston, Mass., August 22, 1919. 
C. E. Robinson, 

Vice President Laclcaicanna Steel Co., Buffalo, i\^. Y. 
Mr Dear Me. Robinson : I have your favor of August 19 with regard to the 
question of " Pittsburgh basing." After consulting with the other members of 
our office, we all have to plead that we know very little about the matter in 
question, but we all feel that the basis which has governed the sale of steel 
products in the past has worked satisfactorily to us and we can see no reason 
for changing it. Of course, however, we remember that New England is a small 
corner of the country and that our view is somewhat limited. 

Regretting that we can not discuss the matter in a larger way, I remain. 
Sincerely yours, 

E. T. Pevebxy, Secretary. 

STATEMENT OF JONES & LATIGHLIN STEEL CO. 

[Statement protesting against a change in Pittsburgh basing point for steel products sub- 
mitted by Jones & Laughlin Steel Co., of Pittsburgh, Pa., to the Federal Trade Com- 
mission in compliance with suggestion in its letter of July 26, 1919, to E. H. Gary, 
president of the Iron and Steel Institute.] 

To the Federal Trade Commission : 

The question involved is of very great and far-reaching impor- 
tance. It affects not only the iron and steel business of the country 
but other interests identified and associated with the manufacture 
of iron and steel and without which iron and steel could not be 
produced. It affects labor beginning at the mines and quarries and 
ending only with the finished product, and labor again in the trans- 
portation of great tonnages of vaw materials inbound and the fin- 
ished products outbound. It affects railroads, because if Chicago 
is made a basing point railroads such as the New York Central 
and Pennsylvania will lose large revenues by reason of lessened 
traffic, or freight rates will have to be materially reduced in order 
to give the mills in the Pittsburgh district an opportunity to com- 
pete for the business in the Chicago district and , in the territory 
west, northwest, and southwest of Chicago; and it follows, as a 
matter of course, that if multiple basing points are established other 
railroads will be similarly affected; they will lose traffic unless the 
freight rates are reduced. It affects merchants and the public not 
merely in one locality, but throughout the length and breadth of 
the land, because all the country's industrial and mercantile pro- 
duction was built up under to-day's Pittsburgh basing point. 



129 

At this point we desire to say a word about the early history of 
iron manufacture in this country. The first attempts to make iron 
began long before the Eevolutionary War and were confined to a 
narrow district at or near the Atlantic seaboard, chiefly in Virginia, 
New Jersey, and eastei-n Pennsylvania, but the production was so 
small and the methods so crude it remained for Pittsburgh to make 
pig metal and roll it into finished shapes in a large and conmiercial 
way. With the coming of Pittsburgh to be an iron manufacturing 
center probably 100 j-ears ago, it was naturally and logically made 
the basing point, and such it has remained to this day, through 
the full and free play of competition in good times and bad and 
against attempts of buyers to change it. It is, therefore, only true 
to say that the Pittsburgh price as the base price for iron is as old 
as the iron business itself. With Pittsburgh as the basing point, 
the manufacture of iron and steel has grown to immense propor- 
tions, evidencing free and fair competition between all sections of 
the country in accordance with the well-known natural laws of 
competition in trade. The business must have been competitive or 
it would not have endured and prospered through all the changes 
brought about by growth in population, wealth, development of 
the country's resources, and the establishment of many large self- 
contained steel plants, east, west, and south of Pittsburgh. 

That Pittsburgh was made the basing point through a combina- 
tion or agreement or understanding amounting to agreement is an 
impossible thought. The Jones & Laughlin Steel Co. was founded 
in 1853 and has never during the 66 years of its existence discussed 
with its competitors the fixing of Pittsbui'gh as a basing point. 

Does its continuance as the basing point violate section 2 of the 
Clayton act of October 15, 1914, or section 5 of the Federal Trade 
Commission Act of September 26, 1914? Those acts are intended 
to encourage, to promote, to stimulate competition. Is the effect 
of a continuance of Pittsburgh as the basing point such as to "sub- 
stantially lessen competition" and create a monopoly? We main- 
tain the very opposite of this. 

The application presented is in the interest of having Chicago 
made a basing point, with a price " as low as the price at any other 
point," but anyone of the places where large and self-contained steel 
plants are located may ask, with equally good reason as Chicago, 
to be made a basing point. If this were brought about it is plain 
that every mill would have a monopoly of its local territory and 
would be unable to compete outside of its narrow circle and free 
competition over the whole country would be abolished. 

The great bulk of steel products leave the mills ia crude form 
and is shipped to manufacturers whose business it is to put this 

139378—19 9 



130 

steel into highly finished and useful f oi'ms for consumption by the 
public, such as bolts, nuts, rivets, fencing, forgings, fabricated 
structural material for buildings and bridges, railroad cars and 
equipment, boat-building material, agricultural implements, tin cans 
and oil-well supplies, and many other purposes; and these manu- 
facturers of the more finished forms would in turn be restricted 
to their own narrow geognipliical limits and could not ship broad- 
cast as they now do. Many mills and manufacturers located where 
there are no large and important local markets would have to 
suspend, 

A multiple basing point would have a disastrous effect on the 
economic conditions of the whole country. Labor wages would of 
necessity be reduced in mines and mills and in all collateral indus- 
. tries in the effort of one mill to compete with another, reaching to 
the railroads in their endeavoi's to retain the valuable freights which 
thej' now enjoy, as heretofore mentioned. 

Not only would the large steel plants be adversely affected, but 
scores of small rolling mills, many of which buy their raw material 
in the shape of billets and slabs from the larger works, would be 
forced to close. These small mills, established and developed with 
Pittsburgh as the basing point, have maintained their places and en- 
joyed a profit. 

Attached hereto and made a part of this statement are tables 
showing total production of finished rolled iron and steel by States 
for the years 1917 and 1918, with other tables showing a comparison 
of the production of what might be termed Chicago or Western 
mills with the Pittsburgh district mills. 

The Chicago district in 1917 produced 18 per cent of the coun- 
ti-y's total iron and steel output, and in 1918, 19 per cent, while 
wliat may be considered the Pittsburgh district in 1917 produced 
G5 per cent, and, in 1918. 71 per cent of the country's total produc- 
tion in iron and steel. These percentages in theinselves indicate 
the reason why Pittsburgh has always been and is now the basing 
point. 

The Jones & Laughlin Steel Co. has shipped into the Chicago 
district and the western territory tributary thereto for several years 
past from 25 to 30 per cent of its production, and the presumption 
is other mills have shipped as much. It is manifest, therefore, that 
the Chicago district would fall far short of supplying its local 
market and the great territory west, southwest, and northwest. The 
general effect of making Chicago a basing point would be a deprecia- 
tion of investment in the Pittsburgh district and a call for new 
and additional investment in the Chicago district. This would 
mean tearing down in one district and building up in another with- 



131 

out changing the country's total steel production and would also 
result in a depreciation — in some cases the destruction — of indusr 
tries which have been built up in the Pittsburgh district to supply 
the needs of the iron and steel mills located there. 

It would be a narrow view of the question (we say this with 
great respect to the Commission) that would give consideration 
only to the steel industry of the coimtry. Many other interests 
are necessarily affected — ^the merchant who has established him- 
self under trade conditions as they now are with Pittsburgh as 
the basing point; the small manufacturer who buys a carload of 
steel or more and works it up into a hundred different articles; 
the workmen who own their own homes in the Pittsburgh dis- 
trict and who would be compelled to leave them to make homes 
elsewhere — the interests that would be affected are very many and 
the injury almost incalculable, because such interests represent the 
growth and development of this counti-y for at least a century. 

The Jones & Laughlin Steel Co and all other independent steel 
companies would be at an unfair disadvantage if Chicago were 
made a basing point, to say nothing of other basing points that nat- 
urally would follow because the United States Steel Corporation 
has large and complete producing units at almost every important 
steel producing point. If these points should carry their own base 
price the one largest producer in the country would hold a position 
of advantage in every market and in some, as, for example, Duluth, 
Minn. ; and Birmingham, Ala., have no competition. * 

To make Chicago a basing point is impracticable. Chicago has 
now and always will have an advantage of at least a week in making 
deliveries to customers in its territory. It is unthinkable that Chi- 
cago steel manufacturers with such an advantage would volvmtarily 
name prices for their products substantially below those fixed by 
the competition of other districts, nor do Ave believe that the play 
of natural laws of competition can successfully be overcome by any 
arbitrary action or ruling. 

Pittsburgh as a basing point really means free competition be- 
tween all parts of the countr}". This is not a violation of the Fed- 
eral laws. It is their rich fulfillment. We therefore believe — and we 
submit experience proves — that the change proposed Avould be 
against the best interests of the country. 

The war that has engaged the world is scarcely over. There is 
inflation in almost everything — in money, in wages, in cost of liv- 
ing — which we hope and trust by an orderly and natural process 
will adjust itself without friction. In our judgment nothing would 
disturb this adjustment more quickly and disastrously than the 
change now proposed by certain buyers of steel having a local view- 



132 

point and forgetting that the welfare of the whole country must be 
conserved, and we respectfully suggest that in the matter presented 
for your consideration it would be extremely unwise to make any 
change in the long established order of things. 

In conclusion we desire to make specific denial that either the 
Pittsburgh base or the price of steel is the result of agreement by 
or between manufacturers of steel products. 
Kespectfully submitted. 

Jones & Latjghlix Steel Co., 
Willis L. King, 

Vice President. 
Pittsburgh, August 26, 1919. 

Production of finished rolled forms by States shotcing iron and steel separately. 

1917. 



states. 



Iron. 



Steel. 



Total. 



Maine, Massachusetts 

Rhode Island , ComiecUcut 

yew York 

Xew Jersey , 

Pennsylvania 

Delaware, Virginia 

Maryland 

West Virginia 

Kentucky, Tennesse, North Carolina Georgia, Texas. 

A lahama 

Ohio . 



Ind iana 

Illinois 

Michigan, Wisconsin, Minnesota. 

Missouri, Oklahoma 

Colorado, Utah, Washington 

California 



Total. 



' Gross Ions. 
.1 24,215 
.: 9,489 

82,716 
40,543 
793, 551 
27, 058 
2,511 
1,642 
51,229 
1,022 
192, 418 
306, 5(M 
175, 528 



112, 265 
30,224 
16,842 



Gross tons. 

194, 747 

71, 765 

1, 410, 053 

198, 429 

14, 225, 320 

35, 345 

365, 947 

829,952 

271, 215 

883,478 

5, 949, 047 

2, 829, 185 

2, 537, 900 

696, 605 

34, 121 

543, 436 

123,397 



Grositons. 

218,962 

81, 255 

1, 492, 769 

238, 972 

15,018,871 

62,403 

368. 458 

831, 594 

322,444 

884,500 

6, 141, 465 

3. 135, 689 

2. 713, 428 

696, 605 

146,386 

573,660 

140, 239 



1,867,757 



31,199,943 33,067,700 



1918. 



Stales. 


Iron. 


Steel. 


Total. 


Elaine, Massachusetts 


Gross Ions. 

2.3, 112 

9,832 

77, 068 

30, 108 

688,310 

22, 889 

2,055 

5, 241 

50,.786 

4, 579 

169,490 

204,535 

133, 106 

3,766 

89, 385 

39, 810 

19, 904 


Gross tons. 

158,001 

71,485 

1, 563, 114 

187,372 

13, 148, 135 

18,695 

414, 158 

726, 236 

188, 438 

750, 8S9 

6. 001, 842 

2, 639, 894 

2,3:17,117 

. 729, 272 

25; 700 

474, 360 

147, 070 


Gross tons. 
181,113 


Rhode Island, Connecticut 


SI, 317 


New York 


1,640,182 




217, 480 


Pennsylvania 


13, 836, 445 


Delaware, Virginia 


41,584 


Maryland 


416, 213 


West Virginia 


731,477 


Kentucky, Tennesse, North Carolina, Georgia. Texas 


239, 224 


Alabama 


75.5,468 


Ohio 


6,171,3.32 


1 ndiana 


2, 844, 429 


Illinois 


2, 470, 223 


Michigan, Wisconsin, Minnesota 


733, 038 




115, 085 


Colorado, Utah, Washington 


514, 170 


California 


166,974 






Total 


1,573,976 


29, 581, 778 


31,155,754 







133 

A comparison of what might be termed Chicago or ■western mills 
with Pittsburgh district mills is as follows : 



Finished rolled iron and steel. 
CHICAGO DISTRICT. 



1917 



1918 



Michigan, Wisconsin, Minnesota. 

lUinios 

Indiana 



Total . 



Gross tons. ] Gross tons. 

696, 605 i 733, 038 

2,713,428 ■ 2,470,233 

3, 135, 689 i 2, 844, 429 



1 6, 545, 722 



» 6, 047, 690 



PITTSBURGH DISTRICT. 



I Gross tons. 

>'evi' York, (major portion in Buffalo district) I 1. 492, 769 

Pennsylvania I 15^ 018. 871 



■West Virginia. 
Ohio. 



Total. 



831, 594 
6, 141, 465 



Gross tons. 

1, 640, 182 

13,836,445 

731, 477 

6, 171, 332 



'23,484,699 « 22, 379, 436 



' Equals 18 per cent of country's total production. 
' Equals 19 per cent of country's total production. 
' Being 65 per cent of country s total production. 
* Being 71 per cent of country's total production. 

STATEMENT OF UNION DKAWN STEEL CO. 



Chicago, III., April 24, 1919. 
Federal, Trade Commission, 

Washington, D. C. 

Gentlemen : Eepljang to 3'oiir favor of April 14, Avith reference 
to correspondence between ourselves and the Great Western Manufac- 
turing Co., La Porte, Ind., y^e are pleased to give you such information 
as you desire as a matter of courtesy. 

The Great Western Manufacturing Co. was mistaken when it 
stated that on a recent order we made a price f . o. b. Pittsburgh, and 
then shipped same from Gary, charging the difference. 

In the first place, we have had no order from the Great Western 
Manufacturing Co., but simply an inquiry. They wrote us on March 
29, asking us to quote on screw stock, ns they stated they had a battery 
of six National Acme screw machines, and they would constantly be 
in the market for screw steel. 

On March 31 we quoted them in carload lots 28 per cent discount, 
less than carload lots 23 per cent discount, f. o. b. our mill, Beaver 
Falls, Pa., and also stated that we were in position to give them 
prompt deliveries from our Beaver Falls, Pa., and Gary, Ind., mills; 
also from our Chicago warehouse stock. 

Under date of April 1, they asked us for the analysis of our screw 
stock, and stated that they would be willing to purchase this from our 



134 

Gar}', Ind., mill, as that is only 30 miles from La l*orte. Under date 
of April 3 we advised them that an,y shipments either from Beaver 
Falls, Pa. (which is in the Pittsburgh basing territory), or Gary, 
Ind., mills are all sold f. o. b. Beaver Falls. In other words, our price 
is base f. o. b. Pittsburgh, and where shipment was made from Gary 
or Pittsburgh freight is equalized. That is, we add the freight from 
Beaver Falls or Pittsburgh (which are the same) to La Porte, Ind., 
to the invoice and deduct from the invoice the freight from Gary to 
La Porte. In other words, whether the material is shipped from 
Pittsburgh to La Porte or from Gary to La Porte, the cost is the same. 
This you will doubtless understand is simply meeting the condition 
known as Pittsburgh freight equalized, Avhich is the way all steel is 
being sold at the present time, and is the way all steel was sold during 
the war, with exception of a period of a few months when the War 
Industries Board made Chicago a base point, but it was afterwards 
changed to Pittsburgh, being the only base point. 

Mr. Lonn, of the Great Western Manufacturing Co., should know 
what that means. I am rather surprised that he does not. 

You understand we do not manufactui-e steel. We finish steel by 
the cold-drawing process. Noav, those producing the steel that we 
finish, and which we sell in the finished form, consider Pittsburgh 
as the basing point. In other words, suppose we purchased bars at 
the regular price to-day of $2.35 base, Pittsburgh district. The car- 
load rate of freight to Gary is 27 cents per hundredweight. If we 
are buying the base size bars, we pay $2.35 plus carload rate of 
freight (27 cents), malring the price that we pay for the steel $2.62 
per hundredweight f. o. b. Gar}'^, Ind. Now, when we sell it, we sell 
it on the same basis, f. o. b. Pittsburgh, Pittsburgh freight equalized. 
That means that when we ship it from Gary we add the freight 
from Pittsburgh to destination, then subtract the freight from our 
Gary mill to destination. In other words, it costs the man just the 
same whether it is shipped from Pittsburgh or Garj'. 

As to how we justify such a practice as this, I would state that 
it is the general custom. It is not exclusive Avith us. It is univer- 
sally done, and everyone selling steel does this. Everybody in the 
steel business knows that with one mill located at Youngstown, 
which is 50 or 60 miles from Pittsburgh; another mill located at 
Gary, and another one located some place else, if you do not have 
some central basing point on which to figure, there would not be 
any two mills that you could compare your prices with; and when 
no two mills are anywhere near the same price a confusion would 
result; but by having Pittsburgh as a base point, w^hen a concern 
sells at $2.35 f . o. b. Pittsburgh, Pittsburgh freight equalized, a 
customer can immediately tell whether or not he is getting a little 



135 

advantage without a lot of extensive investigation of freight rates, 
etc. 

If the Pittsburgh mill quoted $2.35, Pittsburgh freight equalized, 
and the Youngstown mill quoted $2.30, Pittsburgh freight equalized, 
you would know immediately that Youngstown was quoting 5 cents 
under Pittsburgh ; but if Pittsburgh quoted $2.35 f. o. b. Pittsburgh 
and Youngstown quoted $2.30 f. o. b. Youngstown, the prospective 
purchaser would not know whether Youngstown was cheaper than 
Pittsburgh until he went to the trouble of finding out what the 
freight rate was from Pittsburgh to his point and from Youngs- 
town to his point ; but by quoting a base price, Pittsburgh freight 
equalized, customer instantly knows Avliether one mill is giving him 
the benefit of a lower quotation or if some other mill is higher. 
Business men in the steel line generally know that this method of 
quoting is vastly superior to haphazard f. o. b. maker's mill. 

Trusting the above gives you all the information you desire, and 
if there is anything further that we can favor you with we shall be 
most pleased to do so, we are. 
Yours very truly, 

Union Draavn Stefx Co., 
a. d. dorman, 
^^ I Wesieyyi Manager. 

STATEMENT OE KOKOMO STEEL & WIRE CO. 

KoKOMo, Ind., August 15, 1919. 

Hon. ViCTOB MUKDOCK, 

Acting Chairman Federal Trade Commission. 

Washington, D. C. 
Honorable Sir: The steel industry has grown up around Pitts- 
burgh as the pioneer in the development of this industry. Large 
plants controlling the lai-ger part of the production of steel in the 
United States have grown up around this point, based upon an ex- 
tended trade to all parts of the country. To establish several basing 
points at different sections of the United States, say, Birmingham, 
Chicago, and Pueblo, Colo., ^vithout taking into consideration the 
freight rates from Pittsburgh to these various basing centers, would 
deprive these large plants at Pittsburgh of a market which they 
have enjoyed since the establishment of tlie steel industry in our 
country. In fact, I know of no company owning plants in Pitts- 
burgh or the Valley that would not suffer a marked loss of trade, 
unless it would be such a company as the Steel Corporation, who 
owns plants, not only in the Pittsburgh district, but in Chicago. 
Duluth, and Birmingham. The existing steel companies located in 
Pittsburgh, with their large production, would be forced to abandon 
a large per cent of their trade to the West, or else move their plants 



^ 136 

to the basing centers, in order that they may be in a position to meet 
competition of those companies who happen to have plants located 
in the various basing centers, which we presume would be those 
mentioned above. They must either do this or depend entirely 
upon the export trade to consume the sui-plus, which they have been 
sending West, unless they desired to continue to send it West at a 
considerable loss; the result of abandoning the Pittsburgh base as 
the one controlling basing center for the steel industry in the 
United States. Temporarily, at least, if a reasonable profit onl}-- 
is to prevail in steel, the changed basing points would result in a 
shortage of the supply of steel to the various sections of the country 
who are now depending upon Pittsburgh to supply them with this 
material, for Chicago, Duluth, and Birmingham would not be ade- 
quate on a basis of their present production of steel to supply Pitts- 
burgh's quota should this steel be withdrawn from the market on 
account of the change in basing points. But even should Pittsburgh 
continue to ship steel, she would be considerably handicapped, and 
the tendency of the other basing points would be. on account of 
their advantage, to increase their capacitj' until they Avere able to 
meet the demand in the zone which they control. The result of this, 
as you will readily see, would be to greatly increase the production 
of steel at the new basing points and the languishing of the steel 
industry in Pittsburgh and the Valley. 

Again, to have more than one basing point would be to concentrate 
the production of steel at two or three points or centers in the coun- 
try, and a plant located halfway between Chicago and Pittsburgh 
could never expect to be a large producer of steel because it Avould 
be at a marked disadvantage with steel mills located at the basing 
center with the result that we would have steel works o-athered in 
a few centers in the country and not distributed through the various 
States promiscuously as at the present time, with a greatly increased 
possibility of severe strikes and labor troubles, which would be dis- 
advantageous to the industry as well as the general public. 

As an illustration, take a plant located as our own between Pitts- 
burgh and Chicago. If Chicago is a basing point, we will be handi- 
capped on shipments west of the Mississippi about $3.40 a ton. This 
on a year's output of 120,000 tons, on the theory that all of our busi- 
ness went west of the Mississippi, would be in the neighborhood of 
$400,000 handicap against Chicago as a basing point. The net result 
will be that of necessity we will have to move our plant to the bas- 
ing point, for no business concern would consider an annual handi- 
cap of what would constitute an excellent profit for each year, for it 
would be impossible for us, in the limited zone between Pittsburgh 
and Chicago as a basing point, to market our production. We could 
only cover a small portion of the State in which we are located on a 



137 

par with either of these basing points, and certainly the -territory 
in which we would have an advantage because of our geogTaphical 
location would be confined to a very few counties. In fact, we 
would destroy that condition, which is one of national security, and 
we so found it during the war. Large bodies of men concentrated^-- 
at any point engaged in the same industry is a menace to a certain 
degree to continuous operation of plants, because strikes and labor 
trouble of every sort are liable to occur, which interferes with the 
Nation's business and development. 

The country woxild be much better off with the steel industry dis- 
tributed over the United States, as they exist to-day, their loca- 
tion being based upon a study of the business condition, freight-rate 
supply, and of raw material and labor, rather than have this natural 
condition supplanted by an enforced artificial arrangement brought 
about by an arbitrary fixing of basing points, for if this proposed 
change is made, endless confusion will result. Cities which are 
flourishing and which were pioneers in the industry, some of them, 
will languish. The East Mdll be handicapped, and with its tremen- 
dous industry will have as its zone only a small strip of territory 
along the Atlantic Ocean. To advance beyond the central portion 
of Ohio into western Ohio or Indiana it will have to assume a handi- 
cap in the form of an excessive freight-rate charge. 

For a number of years it was practically the only steel-produc- 
ing center in the United States, and wherever steel was used the 
consumer or buyer of it had to look to Pittsburgh. Pittsburgh was 
built upon the basis not of a part but of the entire trade in steel of 
the country. Endless confusion in prices will result. Communities 
that are in a flourishing condition, their prosperity being based upon 
the fact that they were built around a steel plant, will lose their 
chief industry, and the community will languish because many of 
them will have to either go out of business or move their plants 
to new steel-producing basing points, and, as stated above, no com- 
pany existing will be exempt from the radical changes that will 
occur except the Steel Corporation, Avho have plants in all of the 
basing centers, and who will because of that practically have a 
monopoly of the market and be the only concern that would not 
suffer a handicap. 

Personallj^, I believe that the present arrangement of having the 
single basing point is the best arrangement, because it will allow the 
development of the steel industry in any city or in any State in the 
Union that enjoys an advantageous position with regard to fuel, raw 
material, or labor, and this, after all, is the economic result sought to 
be attained. Few vicinities have all of the raw material, in fact, 
none; and while Duluth may have iron ore, she has no coal, while 
Indiana has plenty of coal and no iron ore and is the center of 



138 

population. The situation should be left as near the present ar- 
rangement as possible, if the general distribution of the demands for 
raw material and labor is to be the most uniform throughout our 
country and if we are to preserve and leave open the door of oppor- 
tunity to each and every community in our country to develop her 
industrial life. I can not feel that we would serve our country best 
by forcing the great armj^ of laborers who work in our steel plants 
into the congested area of a few great cities and their vicinity. The 
proposed change could result in nothing else but creating a few great 
steel-producing centers around which all of the steel plants of the 
United States would be centered. 
Yours very truly, 

Kokojmo Steel & Wire Co., 
J. E. Feedigk, Secretary. 

STATEMENT OE NATIONAL BOLT & NUT CO. 

Pittsburgh, Pa., Jxily 10, 1919. 
Federal Trade Commission, 

Washington, D. O. 

Gentlemen : We notice in the trade papers that certain interests 
are endeavoring to have a Chicago basis put into force on steel bars, 
etc., in addition to the present Pittsburgh basis. 

We believe this is being agitated by the middle west and western 
hardware jobbers and consumers, etc., with a view to bujang both 
raw and finished material at lower prices than they are now getting, 
which would benefit them and no one else. 

There are quite a few mills in the Chicago territory making bar 
iron, who at times undersell the steel mills and frequently sell iron 
bars at the Pittsburgh base price in effect, f. o. b. their mills, which 
gives the jobber and our competitors who make bolts, nuts, and rivets 
from iron bars an advantage over Pittsburgh manufacturers in 
the respect that they purchase iron bars at the same price f. o. b. 
Chicago and vicinity that we have to j)ay for steel bars in Pittsburgh. 

This gives our competitors an advantage over us of 27 cents 
per 100 pounds in carload lots and 39 cents per 100 x^ounds in less 
than carload lots, same being the freight from Pittsburgh to Chicago, 
and if they are to be placed in position to j)urchase iron or steel bars 
on a Chicago basis, which quite naturally will be lower than the 
Pittsbui^gh basis, plus tariff rate of freight to Chicago, then we will 
be put to a much greater disadvantage than we are to-day. 

This company manufactures railroad track bolts, hot-pressed and 
cold-punched nuts, structural and boiler rivets, and we sell to the 
largest railroads in the country and have sold at some time or another 
nearly all the leading roads; in fact, they consume 75 per cent of our 
entire production, which is approximately 75 to 100 tons daily. 



139 

We understand the railroad purchasing agents have instructions 
to give the preference in placing orders to the manufacturers located 
at nearest point to the line of their road, and if these instructions are 
carried out, and no doubt they ^vill be, when prices are practically 
the same we are placed under greater disadvantage and woidd be 
further handicapped by the Chicago basis on raw material, since we 
can not market our entire production to railroads in this territory, 
as thej^ can not consume this tonnage; that is, the roads to whom 
we would naturally sell on account of our geographical position, 
which makes it necessary for us to seek the business of all railroads 
in the United States, regardless of their locality. 

We are presenting these facts to jon because the present Pitts- 
burgh basis appears to us to be the most equitable for all concerned, 
and we would like to see the long discussion and agitation for 
Chicago basis eliminated for such time until it can be proven that 
it will be for the best interests of all concerned to change the present 
basis. 

Yours very truly, 

National Bolt & Nut Co. 

STATEMENT OF DONNER STEEL CO. (INC.). 

Philadelphia, August 27, 1919. 
Mr. Victor Mxjrdock, 

Acting Chairman Federal Trade Com/mission, 

Washington, D. C. 

Dear Sir : Replying to yonv letter of the 13th instant regarding 
the question of selling rolled steel on a Pittsburgh basing point basis, 
we mention various reasons wh^- in our opinion this practice should 
be continued for the best interests of all concerned : 

{a) Buj-ers and sellers have been educated along this line for some 
time past, and the practice is thoroughly established and under- 
stood. 

(&) The Pittsburgh district is the largest steel -producing district 
in the United States, and being centrally situated reflects at all times 
the actual steel market better than any other location. The valleys 
and other near-by points should be considered as forming a part of 
the " Pittsburgh district ■' in considering the tonnage, althoiigh rates 
vary slightly. . 

(c) The custom conforms to good commercial practice both from 
the standpoint of buyer and seller. This is true especially from the 
buyer's standpoint, for it enables him to determine instantl}^ the 
lowest quotation which he has received from several districts as he 
immediately looks for the lowest quotation " Pittsburgh basis." To 
establish various basing points, therefore, would complicate the situa- 
tion exceedingly, as it would be necessary for the buyer, upon 



140 

receipt of quotations from various producing points, to determine the 
freight rates from such producing points to his point of consumption 
in order to arrive at the lowest quotation which he would then haA^e 
in hand. 

{d) There is no frteel-producing j)oint which can supply at all times 
the demand of a given district, and as a consequence buyers of that 
district are at certain j)eriods forced into other markets, and they 
naturally look to tlie greatest producing district — Pittsburgh. For 
example, under ordinary conditions Ave enjoy a good share of the 
business placed in Buffalo and vicinity, but there are times when our 
order book may be;:'ome such that we can not meet the demand, and 
bu3''ers of this vicinity are consequently forced into other districts. 

{e) Tli.e practice certainly encourages legitimate competition, and 
in this respect is of considerable moment to the buj'er, who is always 
interested in securing competitive bids. There is, however, a certain 
condition always to be considered, and that is the fact that buA'ers 
usually place their business at a time most convenient to their needs, 
while, on the other hand, the seller's order book changes frequently, 
thereby developing a situation which would prove serious to the 
buj'er were it not possible for him to go into other districts to secure 
his requirements. For example, Bulfalo )xiills may be able to meet 
the demand in this vicinity to-daj^, but Buffalo buyers maj'^ not be 
placing orders, and the result is that mills fill up with business from 
other sections, and when buyers are ready to place orders they find 
the mills of their district sold up, and are forced to place their orders 
elsewhere. 

We have given the question considerable thought, both from the 
buyer's and seller's standpoint, and can not see any reason why Chi- 
cago should be established as a basing point any more than Buffalo, 
Youngstown, Bethlehem, etc. In fact, we are satisfied that any devia- 
tion from the present practice Avill accomplish no particular good for 
either buyer or seller, but, on the other hand, Avill seriously compli- 
cate the situation for all concerned. 
Yours truly, 

W. H. DoNNER, President. 

STATEMENT OF W. A. COLLINGS CO. 

Kansas City, Mo., August S7, 1919. 
Federal Trade Commission, 

Washington., B.C. 
Gentlemen : Referring to General Circular No. 419, issued by 
Chamber of Commerce of United States of America in relation to 
the basing point for steel, and your invitation to make a statement 
to the commission, I beg to state that after 35 years of experience 
in steel buying (as a small dealer) I do not think of any injustice 



141 

brought about by using Pittsburgh as the single basing point for 
steel prices; in fact, when considering the small buyer as well as 
the large one, I feel that the single basis has always had a steady- 
ing influence on the market, considering all the varying conditions 
which exist. 

I think every steel buyer will agree that after all the most im- 
portant feature of the matter is service : that is, whether one can get 
steel when needed, and in my opinion avg shall have a hard time get- 
ting steel for the next four or five years. 

This subject is so intricate and far-reaching and has so many 
angles (some apparently diametrically opposed to each other) that 
it is almost impossible to properly present it, and I do think with 
the present ivnsettled conditions of labor, building consti'uction, and 
the steel market it is a very bad time to take up this matter. 

We all know there are times when the Chicago mills are crowded 
with orders and the Pittsburgh mills may be slack. In this case a 
dealer in the West who had figured on the Chicago basis, and 
who could not get steel from Chicago but who had contracted to fur- 
nish his customer at the Chicago basis price, would either have to 
get steel from Pittsburgh (on a Pittsburgh basis price) or go with- 
out. This would cause constant confusion. 

To present my views briefl}'^, may I ask the following questions? 

Can we in peace times force any company to sell any commodity 
at any price we wish? 

If we have a double price basis, would it restrict competition by 
keeping the Chicago mills out of the Pittsburgh district, and vice 
versa, when competition is just what we want? 

How far east of Chicago would the Chicago basis apply? 

Would the dealer who bought steel on a Chicago basis sell at a 
cheaper price than the dealer who bought on a Pittsburgh basis? 

How would we arrive at the proper price to charge at Chicago 
above the Pittsburgh price? (I assume the other basiiig point would 
be Chicago.) 

At present a small dealer can buj- a mixed car of a number of steel 
products, all carrying the same freight rate, but not made in the 
same mills, the steel makers carrying stocks in their warehouses 
for this jDurpose. A double price basis might stop this, as the mills 
would not carry stocks, forcing the small dealer to buj'^ a full car 
of each commodity, some at Chicago, some at Pittsburgh, which, of 
course, he could not do, as he can not use a full carload of each. 

There are at present independent mills at Pittsburgh which make 
products that are not made in the Chicago district, but which com- 
pete with a pi'oduct made by the United States Steel Corporation 
mills in Chicago district. If the Chicago two-base price should apph', 
it would put the independent Pittsburgh mill out of business. 



142 

How would it affect the large jobbers, say, in Cliicago, who carry- 
large steel stocks, bought either at Pittsburgh or Chicago mills at the 
present satisfactory single-base price? Suppose the Chicago mills 
being congested, they had to buy in Pittsburgh at Pittsburgh price 
and mix with stock bought at the Chicago price. Would this not be 
most fearfully' confusing? How could they make staple quotations 
to their customers, and would tliey not have to quote two prices on 
all steel bought at either Chicago or Pittsburgh? Would this not 
apj)ly to the local jobber and small dealer also? 

There are many steel products that are made in the Pittsburgh 
mills but which are not made in the Chicago district. AMiat price 
basis would we use for Chicago district sales ? 

• If we make 2 basing j)oints, sa}-, Chicago and Pittsburgh, why 
not 8 or 10, such as Sparrows Point, Cleveland, Birmingham, Ala., 
Dallas, Duluth, Los Angeles, San Francisco, and Seattle? The " plot 
thickens." 

We have a small mill here at Kansas City. What basis would this 
mill use? 

Of course, we must consider the interests of the steel producer, the 
manufacturer who uses steel, the jobber, the small dealer, and the 
ultimate consumer; but it appears to me that the parties who are 
pushing this investigation and who are in favor of a double basis are 
considering only the ultimate consumer. 

All mills can not make steel equally economical ; many of the older 
Chicago mills perhaps would have to shut down if forced to make 
a less price than the n>ore highly efficient mills at Pittsburgh, with 
Chicago freight added. 

Are we sure that the Chicago mills can make all the steel needed 
in the Chicago district and in the West ? If not, it will be seen what 
confusion would arise when two dealers compete in the saine town — 
one who buys on the Chicago basis and one who buys on a Pittsburgh 
basis. 

Suppose it should be found that the Chicago mills could not turn 
out a sufficient amount of any particular kind of steel to fill the 
Chicago district's needs, then some small dealers (the large jobber 
would be sure to get his at the lower price) would have to buy at 
Pittsburgh at the higher price. How could the small dealer stay in 
business? This applies also to the Pittsburgh district. 

Many works in the Chicago district onh^ handle semifinished 
billets or rods, turning these into the finished products, such as wire, 
barb wire, nails, etc., buying the raw material on a Pittsburgh base 
and selling on a Chicago base. If the difference between Pittsburgh 
and Chicago was not enough, these mills would have to go out of 
business. 



143 

If we make a lower basing price at Chicago than the Pittsburgh 
price (say 10 cents above Pittsburgh), with freight added to Chi- 
cago, what would hinder the mills from raising the price at Pitts- 
burgh to make up for the difference, automatically raising the price 
at Chicago? 

There are many disadvantages which I can see would work against 
the small dealer (and I am only considering him) if any change is 
made in the present single Pitt>'ourgli base, and I feel confident any 
change would put many small dealers out of business (as well as some 
of the independent mills) by the larger, favored firms being able to 
get their stock on a Chicago basis, while the small, less-favored 
dealer would have to get his stock at Pittsburgh on a Pittsburgh 
basis. 

On this account and for the further reason that it would add to the 
pi'esent commercial confusion (Avhen everything should be done to 
encourage and coax business) , I believe it would be very unwise to 
nuike any change at the present time. 
Yours very respectfully, 

W. A, COLLINGS. 

STATEMENT OF WEIRTON STEEL CO. 

[In the matter of the application of the Western Association of Rolled Steel Consumers 
for complaint against the United States Steel Corporation and others.] 

To the Federal Trade Commission, 

Washhigton, D. C .: 

The Weirton Steel Co., a member of the American Iron and Steel 
Institute, complying with the suggestion contained in the letter of 
the acting chairman of the Federal Trade Commission to the presi- 
dent of the American Iron and Steel Institute, dated July 26, 1919, 
in the matter of the application of the Western Association of 
Rolled Steel Consumers, hereb}^ states its position with reference 
to said matter, as follows : 

1. The "Weirton Steel Co. is a corporation of the State of West 
Virginia engaged in manufacturing rolled steel products; that is, 
tin plate and hot and cold rolled strip steel. Its tonnage amounts to 
approximately 350,000 tons per annum. Its plants are located in 
the Pittsburgh district; that is, at Weirton, W. Va., Clarksburg, 
W. Va., and Steubenville, Ohio. 

2. Pittsburgh is the center of iron and steel production in the 
United States; that is, at Pittsburgh or the district surrounding it, 
and of which it may be called the center, the manufacture of iron 
and steel in the United States on a large scale had its origin and 
gradually grew to an enormous tonnage, and until a comparatively 



144 

recent time the tonnage of steel products in other districts was 
almost negligible in amount. 

3. As a natural result of the iron and steel business having its 
origin in the Pittsburgh district and gradually growing therein to 
its present large proportions, a custom grew up of selling steel prod- 
ucts on a Pittsburgh base; that is, it became and has for many years 
been the custom in the trade to quote prices as though delivery by 
the manufacturer was to be made from Pittsburgh and to add to 
these prices the freight from Pittsburgh to the point of destination, 
no matter whether the product was manufactured in and shipped 
from Pittsburgh or the Pittsburgh district or not. This has been 
a trade custom of long standing in the business, growing, as above 
stated, naturally out of the fact that in early days practically all 
iron and steel produced in the United States was produced in the 
Pittsburgh district, and continuing down to the present time be- 
cause of the vast preponderance of Pittsburgh as a steel manufac- 
turing center, and it is not and never was the result of any arrange- 
ment, agreement, or understanding among iron and steel producers. 

4. In recent years steel has been manufactured in other districts 
than Pittsburgh in comparatively small quantities. In the district 
referred to in the application as the Chicago district in the year 
1918 less than 20 per cent of the total of finished rolled iron and 
steel of the United States was produced, whereas in the Pittsburgh 
district over 70 per cent of this total was produced. These relative 
tonnages are shown on the schedule hereto attached. With the 
growth of this production in other than the Pittsburgh district the 
producers in these other districts adopted and continued the custom 
hereinabove referred to ; that is, sold on a Pittsburgh base. But, as 
above stated, they did so simply by way of conforming to a long- 
established custom and not b}' reason of any understanding, agree- 
ment, or arrangement among themselves or other producers. 

5. The adoption, growth, and continued use of said custom shows 
that it was needed in and beneficial to the business. It tends to stand- 
ardize and simply the business and to allow and bring about a wider 
distribution of rolled-steel products from all producing districts, and 
its abolition would tend to create confusion, would restrict distribu- 
tion, would disturb existing labor rates in all producing districts, 
and would increase costs and cause loss and injury to producers, while 
it woidd in no respect benefit consumers, but, on the contrary, woidd 
likewise cause them loss and injury. As producers, the Weirton Steel 
Co. respectfully represent that said custom is of vital importance to 
the industry and should not be abolished or in any way impaired. 

6. This custom does not in any way affect the price to the consumer. 
The producer, no matter where located, quotes a price which meets 
competition, and quoting on a Pittsburgh base does not prevent him 



145 

from doing so. The fallacy of the position of the applicants lies in 
the contention that the producer in the Chicago district should sell 
his product to a consumer in the Chicago district for less than the 
producer in the Pittsburgh district charges to such a consumer, be- 
cause, as it is alleged, the Chicago producer can produce steel for as 
low a cost as the Pittsburgh producer, and, therefore, by selling for 
the same price and having a lass freight charge to pay, he is making a 
larger profit than the producer in the Pittsburgh district. In other 
words, it is claimed that if a consumer in the Chicago district has to 
pay as much for the steel he buys from a Chicago producer as the 
Pittsburgh producer charges, the Chicago producer is getting an un- 
reasonable profit, and it seems to be contended that the Federal Trade 
Commission should fix the Chicago producer's price so that such un- 
reasonable profit shall not be obtained. But even if it is true that the 
profit which is thus realized by the Chicago producer is unreasonable 
(which, however, we deny), it is a profit he realizes not because of 
the Pittsburgh basing point custom, but because his location near the 
Chicago market gives him an advantage, and in making use of it he is 
not in any way violating the Federal Trade Commission act, nor the 
Clayton Act, nor any other act or law. The advantage is a natural 
one, due solely to his location and not to the Pittsburgh basing point 
custom, and would exist even though the custom were abolished; 
and we submit that what the applicants are seeking from the Federal 
Trade Commission is the fixing of prices upon the Chicago producers' 
products in such a way as to take away this natural advantage, 

7. The demand for rolled-steel products in the Chicago district 
is vastly greater than the amount produced by the Chicago pro- 
ducers, probably twice as great. In consequence, a large part of the 
consumption in the Chicago district must be supplied from the Pitts- 
burgh district. It necessarily follows that the prices charged by 
Pittsburgh producers to the consumers in the Chicago district are 
the prices the Chicago producers have to compete with; and if the 
Chicago producers charge the same prices, they do so not because 
of the Pittsburgh basing-point custom but because the Chicago pro- 
duction is less than the Chicago demand and because the Chicago 
consumer has to buy in large part from Pittsburgh. The law of 
supply and demand has free play and is in no wise affected by the. 
custom of selling on a Pittsburgh base. Whenever the Chicago de- 
mand falls off so that the Chicago production is greater than the 
Chicago demand, the Chicago producer has to lower his price in 
order to take the business from the Pittsburgh producer. When this 
demand increases and can not be supplied from Chicago, the Chi- 
cago producer can ask and get the same amount charged by the 
Pittsburgh producer, even though it gives him a larger profit than 
the Pittsburgh producer realizes. But it is not true that under such 
139378—19 10 



circumstances the Chicago producer increases his price by fictitious 
freight rates or by reason of the Pittsburgh basing-point custom, 
and any increase he receives is due, as above stated, to the natural 
play of the law of supply and demand. 

8. There is no discrimination in the price of steel due to this cus- 
tom. If a Chicago fabricator, desiring to buy steel for use in the 
Pittsburgh district, tries to buy from a Chicago producer and finds 
he has to pay a higher price than he would have to pay to a Pitts- 
burgh producer, it is not because of any discrimination, but because 
the Chicago producer has a demand for all his products at the 
higher price, and certainly is not due to the Pittsburgh basing-point 
custom. And in any cA'ent there is absolutely no discrimination 
either by the Chicago producer or the Pittsburgh producer against 
the Chicago fabricator or in favor of the Pittsburgh fabricator. We 
deny that Chicago producers by reason of said trade custom sell to 
competitors of the applicants at a less price than they make to ap- 
plicants or other fabricators located in the Chicago district, and we 
aver that the fact is that the applicants are asking for a discrimina- 
tion in price in their own favor ; that is, a lower price from Chicago 
producers than these producers charge to Pittsburgh competitors of 
the applicants. 

9. We deny that rolled steel is produced in the Chicago district 
at substantially lower cost than in the Pittsburgh district, and aver 
that, even if it is, the advantage of the Chicago producer arising 
therefrom would not be taken away from him by abolishing the 
Pittsburgh basing custom. We deny that the greatest normal growth 
and increase in iron and steel production under peace conditions 
will be in and about Chicago, and aver that even if it is, it will be 
a long time before Chicago has the preponderance Pittsburgh now 
has, and, in consequence, a long time before Chicago should be made 
the basing point instead of Pittsburgh, if any change should be 
made; and that in any event such a change should come about as 
the natural result of the shifting of the center of trade and not by 
arbitrary action in the face of the laws and customs of the trade. 

10. It is not true that the Pittsburgh basing point custom adds a 
large and arbitrary increase to the price of rolled steel over and above 
the cost of production and a reasonable profit, or that the price is 
any greater than it would be if this custom did not exist, or that the 
price is increased by a large fictitious freight rate. 

11. We respectfully submit that nothing alleged in the applica- 
tion shows the violation of any law or sets up a matter over which 
the Federal Trade Commission has jurisdiction ; that nothing so al- 
leged shows an unlawful restraint of trade or a price discrimination 
contrary to the antitrust acts or to section 2 of the Clayton Act or 



otherwise; that nothing so alleged shows unfair competition in trade 
contrary to the provisions of section 5 of the Federal Trade Com- 
mission Act or otherwise; that nothing so alleged shows any injury 
to the applicants or to others iii their business; but that it clearly 
appears that the sole and only ground of complaint is that the appli- 
cants are charged by Chicago producers for rolled-steel products 
manufactured in the Chicago district more than they think they 
ought to pay, and are asking the Federal Trade Commission to fix 
the prices at which Chicago producers shall sell their products, and 
to that end are also asking that a trade custom of long standing and 
of vital importance to the trade be abolished in the hope that the 
result will be lower prices for these products, whereas in fact the 
abolition of this custom would create confusion in the trade, increase 
costs, and lead to higher prices. 

Wherefore we respectfully request that the petition be dismissed. 

Weirton Steel, Co., 
By E. F. Weir, President. 

Weil & Thorp, 

Attorneys for Weirton Steel Co. 

Charles M. Thorp, 

Of Counsel, 821 Frich Building.^ Pittsl>urgh, Pa. 

Schedule. — Production of all kinds of finished rolled iron cmd steel by districts 

for year 1918. 

Pittsburgh district (including Buffalo) 22,379,436 

Chicago district 6, 037, 690 

All other districts 2, 728, 628 

Total 31, 145, 754 

STATEMENT OF WHEELING STEEL & IRON CO. 

Wheeling, W. Va., August £8, 1919. 
Hon. Victor Murdock, 

Acting Chairman Federal Trade Commission, 

Washington, D. C. 
Dear Sir : We beg to advise that we are members of the American 
Iron and Steel Institute and are in receipt of a copy of your letter of 
July 26, addressed to Mr, E. H. Gary, president of the institute. 

We desire to call your attention to the statement issued by the 
Weirton Steel Co., fully covering this situation, and to advise that 
we heartily indorse the conclusions arrived at therein. 
Yours respectfully, 

Jno. Duncan, 

Vice President and General Manager of Sales. 



148 

STATEMENT OE CENTRAL TUBE CO. 

PiTTSBUEGH, September 1, 1919. 

Federal Trade Commission, 

Washington, D. G. 

Gentlemen : Referring to the application you have received from 
the Western Association of Rolled Steel Consumers for the issuance 
of a complaint against the United States Steel Corporation and 
others, which application alleges that the practice of selling rolled- 
steel products solely on a Pittsburgh price basis is unfair, we are 
not producers of rolled steel, but as wrought pipe and rigid electrical 
conduit such as we do manufacture are made from rolled steel and 
our interests would likely be affected eventually, we are setting forth 
below our reasons for believing that the present selling plan should 
continue unchanged. 

As we understand this petition the applicant desires and recom- 
mends one of the following changes : 

{a) Sole basing point at Chicago. 

(5) Basing points only at Chicago and Pittsburgh. 

(c) Basing points at Chicago, Pittsburgh, and possibly other 

steel-producing centers. 

» 

CHICAGO AS SOLE BASING POINT. 

It is our conviction that if Chicago were made the sole basing 
point, the result would be just the reverse of what the applicant is 
striving for, because statistics given in the following paragraphs 
of this letter indicate that about two-thirds of all the finished rolled 
iron and steel material produced in this country is produced by mills 
in New York, Pennsylvania, Ohio, and West Virginia, and that the 
States of Michigan, Wisconsin, Minnesota, Illinois, and Indiana 
produce less than one-fifth. 

To the best of our knowledge, information, and belief the major 
portion of this material is consumed in the northeastern section of 
the United States, where the freight rates from Chicago to destina- 
tion are greatly in excess of the rates from Pittsburgh to destination. 
This would mean that with Chicago as the sole basing point the 
average price to the consumer would be much higher because those 
buyers in the section of the coimtry where the bulk of the tonnage 
is consumed would have to pay, in addition to their present cost, the 
difference between the freight rates from Pittsburgh to destination 
and Chicago to destination. 

CHICAGO AND POSSIBLY OTHER BASING POINTS IN ADDITION TO 

PITTSBURGH. 

First. We do not believe that having two or more basing points 
would result in lower prices to consumers as a whole in the long run 
because, assuming, for the sake of argument, that numerous basing 



149 

points would restrict each group of steel manufacturers to its par- 
ticular district or zone, the tendency would likely be toward higher 
prices in that zone to compensate for lost jtrade and because the ele- 
ment of competition would be removed. 

Second. It is our belief that steel manufacturers would not be 
contented with the trade possibilities of their legitimate zones, but 
that all manufacturers would seek a market in all zones in order to 
enjoy the same proportion of the total trade as in the past, e. g., 
the Chicago group of producers would invade the zone of the Pitts- 
burgh group of producers and vice versa. This would result in the 
same price to consumers in each zone and such price would probably 
be as high as before because each group of manufacturers would 
have to absorb the freight to the other zone and the average price 
could not be lowered without reducing the average profit. The in- 
dustry could not thrive without a fair return, and we do not under- 
stand that the lessening of average profits is under discussion or is 
sought for. 

Third. There would be no better reasons for making Chicago a 
basing point than for making basing points of Birmingham, Buffalo, 
Youngstown, Cleveland, Philadelphia, Duluth, Minneapolis, Wheel- 
ing, Steubenville, Milwaukee, Pueblo, and many other cities where 
large steel producers are located. The most cogent argument against 
establishing basing points at one or more of the foregoing centers in 
addition to Pittsburgh is that the United States Steel Corporation 
has producing units at several of these points, and they would con- 
sequently reap the benefit, whereas manufacturers like ourselves with 
only one plant would be severely penalized. With the manifold 
advantages already enjoyed by the United States Steel Corporation, 
we believe that further preferment to that corporation would be 
inimical to the public welfare. 

Fourth. So far as our product is concerned, we believe that chang- 
ing the basing points would result in no end of chaos with the dis- 
tributors as well as with the producers, because there would be no 
common basis as exists to-day on which the distributers could de- 
termine their resale prices. This would disrupt the present resale 
scheme and would result in endless confvision. 

Fifth. We have received through the Pittsburgh Chamber of Com- 
merce the following data showing the production of rolled iron and 
steel products in gross tons: 



State. 


1917 


1918 


New York (principally in Buffalo district) 


1, 492, 769 

15,018,871 

831, 594 

6,141,465 


1,640,182 




13,836,445 


"West Virginia 


731, 477 


Ohio 


6,171,332 






Total 


23,484,699 


22,379,436 







150 

Pittsburgh has been the recognized basing point since the early 
days of the steel industry and is internationally known as the Steel 
City of America. 

Pittsburgh might be consideied the heart of the eastern group 
of States aboA^e mentioned which, according to the figures given, 
produced about 65 per cent of the country's total during 1917 and 
about 71 per cent during 1918, 

Chicago might be considered the heart of Michigan, Wisconsin, 
Minnesota, Illinois, and Indiana, which group of States, we are told 
by the Pittsburgh Chamber of Commerce, produced only about 18. 
per cent of the country's total in 1917 and about 19 per cent in 1918. 

In the light of these illuminating statistics, further argument or 
comment would seem superfluous. 

The steel industry is already faced with many disturbing factors 
resulting from war conditions, and it would seem unwise to add to 
this disturbance by changing the present basis for selling steel prod- 
ucts, and we therefore submit that no complaint against the re- 
spondents should be made. 

Yours very truly. Central Tthbe Co., 

W. F. Ingals, 
General Manager of Sales. 

STATEMENT OF INDIANA BRIDGE CO. 

[In re the application of the Western Association of Boiled Steel Consumers for the 
establishment of Chicago as a basing point for the price on rolled steel product.] 

MuNCiB, Ind., August 29, 1919. 
Federal Trade Commission, 

Hon. Victor Murdoch., Acting Chairman., Washington, D. C. 

Gentijemen : We desire to avail ourselves of the opportunity which 
you have offered for anj'one interested in the above application to 
submit a written statement for your consideration. 

This company is engaged in the fabrication of structural steel for 
buildings, bridges, viaducts, and other engineering structures and has 
been established in the city of Muncie, Ind., since 1887. We are 
buyers of rolled steel products, and one of the principal considera- 
tions in the location of this plant in Muncie was to enable us to serve 
this particular territory quickly with our product. The iron and 
steel industry was then principally located at Pittsburgh, which was 
probably the cheapest point of production, and rolled steel was sold 
without exception with Pittsburgh as a basing point. 

We believe that our situation is comparable with many others in- 
volving the investment of millions of dollai's, and all of these would 
be adversely affected by any change of price basing on rolled steel 



151 

products at this or any future time. We believe that the injury which 
a considerable number of established industries would suffer as a re- 
sult of any change of basing point is of greater importance to this 
country than the benefit that would accrue to a comparatively few 
industries so situated as to secure benefit from the change of basing 
point. 

All of the members of the petitioners' association established their 
plants with the knowledge that Pittsburgh was the sole basing point 
for rolled steel products, and should not now, in our opinion, be en- 
titled to benefit through the intervention of your Commission to 
change a custom of long standing which all men have heretofore ac- 
cepted as a standard and established themselves and the institutions 
accordingly. The consequence to the stockholders of this institution, 
if the application of the petitioner be granted, will be serious indeed, 
and we sincerely hope that the application of the petitioners will be 
denied. 

Very respectfully, 

Indiana Bridge Co., 

By J. L. KiMBKOUGH, 

General Manager and Treanweer. 

STATEMENT OF THE KEPUBLIC IRON & STEEL CO. 

[In the matter of the application of the Rolled Steel Consumers for a complaint against 
the United States Steel Corporation and others.] 

Before the Federal, Trade Commission. 

Republic Iron & Steel Co., appearing by leave of the Federal Trade 
Commission and responding to the application of the Western Asso- 
ciation of Rolled Steel Consumers for a complaint against the United 
States Steel Corporation and others, states: 

1. That the custom of selling steel at the Pittsburgh base, plus 
freight to destination, was established by Pittsburgh producers of 
steel in competition and not by agreement at a period when but 
little steel was made elsewhere, and this custom has been generally 
followed by producers in all other districts because the Pittsburgh 
district's competition is recognized as the dominant market influence 
for the following reasons: 

■ {a) That Pittsburgh is the only district which produces aU grades 
and kinds of steel and the only district having sufficient competition 
locally to determine a basis price without agreement. 

(5) That the Pittsburgh district is not only the center of produc- 
tion but also the center of consumption because the great consuming 
sections of the United States are east of the Mississippi River and 



152 

north of the Ohio River and east of the Allegheney Mountains. 
Pittsburgh's geographic position is naturally tributary to these sec- 
tions. 

(e) The Pittsburgh district is one of the cheapest locations for the 
production of steel in the United States, because it is the center of 
the great metallurgical coal fields and also is the center of the steam 
and gas coal fields, and as it requires 2^ tons or more of these coals to 
produce a ton of finished steel this fact enables Pittsburgh to carry 
2 tons of iron ore to Pittsburgh plants and convert the ore into steel 
cheaper than other districts, regardless of their proximity to iron ore, 
because such districts as Chicago must ship their coking coal from 
fields of West Virginia and Pennsjdvania by either rail or lake and 
part of the season by all rail. Therefore Chicago and other sections 
suffer an excess cost of assembling their raw material for conversion 
into steel. Furthermore, the Chicago district and other western 
districts are under the disadvantage of longer hauls on other sup- 
plies, such as manganese ores, wliich are largely imported through 
the Atlantic seaboard, and in addition to this are not so thoroughly 
self-contained on such other supplies as casting machinery, refacto- 
ries, hardware, and various other supplies, such as metaloids, etc. 

2. That the greatest normal growth of steel production will be or 
has been in the Chicago district is controverted by production statis- 
tics, for out of a total United States production of steel ingots for 
the year 1918 of 43,051,022 gross tons the Chicago district produced 
7,570,193 gross tons, or only 17^ per cent of the total steel production 
of the United States, whereas the Greater Pittsburgh district pro- 
duced 19,519,642 gross tons, or over 45 per cent of the total steel pro- 
duction of the United States. 

3. Pittsburgh, with its predominant production and variety, its 
cheapness of product, and also because of its many competitive pro- 
ducers have always naturally qualified Pittsburgh as a basing point, 
and for this reason the custom of selling steel f. o. b. Pittsburgh 
is a natural custom and an economic necessity. 

4. It is true that the Pittsburgh base has not always been main- 
tained because during periods of business depression, and for other 
reasons affecting demand at any given producing point where sup- 
ply is in excess of demand, producers under such conditions, in 
order to protect their operations whether located at Chicago, Buffalo, 
Cleveland, Youngstown, or elsewhere, have sold and doubtless will 
continue to sell again at prices which discount Pittsburgh freight 
rates and, in fact, without profit, frequently at a loss, as in 1914 
and 1915 and other periods. 

5. Steel is not the only product enjoying the distinction of hav- 
ing a base market; in fact, the practice is quite common for sucl^ 



153 - ■ 

steel supplies as spelter, pig tin, coke, iron ore, and manganese, which 
are generally sold as follows : 

Manganese, f. o. b. Atlantic seaboard. 

Pig tin, c. i. f . England, 

Spelter, f. o. b. East St. Louis, 

Coke, f. o. b. Pittsburgh, 

Iron ore, f . o. b. Lower Lake port, 
and in addition to these : 

Flour, f. o. b. Minneapolis, 

Wool, f. o. b. Boston, 

Cotton, f. 0. b. New Orleans, 

Coffee, f, o. b. New York, 

Copper, f, o. b. New York, 

Plate glass, f. o. b. Pittsburgh, 
and other products in a like manner. 

6. That the Pittsburgh base has built up excessive profits for 
the Chicago district mills is not indicated by the published financial 
statements of the respondent companies, although it may be admitted 
that these companies have enjoyed large profits, at times,, but not 
unfairly large when compared with the earnings published by 
other companies located at Pittsburgh, Youngstown, Johnstown, 
Bethlehem, and elsewhere. 

7. With the custom long established of using the Pittsburgh base 
as a " yardstick " of measure for determining competition, rather 
than for the suppression of competition, capitalists all over the 
United States have invested millions of dollars in steel and iron 
fabricating plants in reliance on this custom, and to change this 
custom arbitrarily or in any other manner would throw the iron 
and steel business, railroad rates, and labor into great confusion; 
in fact, chaos, commercially, would result. 

8. It is further claimed that Chicago could not be made a basing 
point, except by an agreement which contemplated fixing a base price, 
because there is no sufficient competition, variety of products, or ton- 
nage to establish Chicago as a basing point by the free play of compe- 
tition, as is the case at the Pittsburgh base, and what is true of Chi- 
cago is equally true of Birmingham, Duluth, Cleveland, Youngstown, 
Buffalo, and other producing points. Therefore more than one base 
is neither practical nor economic. 

9. Complainants charge in the twelfth paragraph of their applica- 
tion " that the prices named therein are made by agreement or under- 
standing amounting to agreement between the respondents or between 
respondents and other producers of steel in order to maintain prices 
of rolled steel and particularly to maintain such increased and unrea- 
sonable prices in and throughout said Chicago district to the members 
of the applicant and other consumers thereift," In so far as this anr 



154 

swiering company is concerned, it denies that the prices mentioned in 
said paragraph 12 are the result of agreement or understanding 
amounting to agreement between the respondents and other producers 
of steel, and further says that the prices at which it sells its commo- 
dities in the Chicago district or in any other districts in the United 
States violates no provision of the Clayton Act nor any of the Federal 
antitrust acts. 

We therefore submit that the application for a complaint should be 
denied. 

Republic Iron & Steel Co., 
By Jno. a. Topping, 
Chairman, 17 Battery Place, New Yorh City. 
E. Jones, Jr., 
General Attorney, Young stown, Ohio. 
New York City, August 25, 1919. 

STATEMENT OF THE MORRIS & BAILEY STEEL CO. 

Pittsburgh, Pa., August 28, 1919. 
Hon. Victor Muedock, 

Acting Chairman, Federal Trade Commission, Washington, D. G. 

Dear Sir : On behalf of our company we desire to protest against 

the establishment of more than one freight basing point for steel 

products. We favor Pittsburgh as the sole basing point and believe 

if Chicago is made a basing point it will add confusion to the situation. 

Yours very truly, 

The Morris & Bailey Steel Co., 
G. B. Morris, Secretary. 

PROTEST OF THE YOUNGSTOWN SHEET & TUBE CO., OF YOUNGS- 
TOWN, OHIO. 

tin the matter of application for a change in the Pittsburgh basing point for steel 

products.] 

Before the Federal Trade Commission of the United States. 

• The Youngstown Sheet & Tube Co., of Youngstown, Ohio, a 
manufacturer of iron and steel and their products, manufacturing 
a million tons of various finished steel products per year, and whose 
plant is situate at Youngstown, Ohio, files this, its protests, against 
the establishment of Chicago as a basing point in addition to Pitts- 
burgh, or, in other words, against fixing the same base price for steel 
products at Chicago as at Pittsburgh, upon the ground and for the 
reason that the entire fabric of the steel trade through a process of 
natural development has been built upon the Pittsburgh basing 
point, and any change therefrom at this time would necessitate a 
readjustment of the long-established business practices of the pro- 



155 

ducer, distributor, and consumer of steel products, and would entail 
great inconvenience and loss to all. • 

The effect of such a change upon the producer is quite apparent. 
The effect upon the fabricator, distributor, and consumer is no less 
real and serious. Their plants in many instances have been located 
in various districts in reliance upon the long-established use of 
Pittsburgh as the basing point, and any change therefrom would in 
many instances affect them very unfavorably. 

The use of Pittsburgh as the basing point is not the result of 
any agreement, express or implied, nor does this trade practice 
violate the Clayton Law or the Sherman Act. It is the pure result 
of the natural development of the steel trade. 

This company was organized in 1900, long after the practice 
referred to became settled. In constant reliance upon that practice 
the plant was located at Youngstown, and has since been enlarged 
and improved until the company now has a total investment of 
$100,000,000 and employs over 15,000 men. 

A great part of the success of this company is due to the fact 
that the Chicago and western markets have been open to it. To 
change the basing point, as suggested, would mean the closing, to 
a large extent, of the Chicago and western markets to this company, 
with a resultant loss in business and injustice to this company, its 
employees and stockholders. 

While the existing condition is, as above pointed out, the result 
of natural development of the steel business and is not the result 
of any unlawful act or acts, yet the tiling which the Commission is 
asked to do, viz., to fix Chicago as a basing point, would be an un- 
lawful act, would result in a concert of action by agreement, and 
would work to the detriment of long-established businesses which 
have grown up in free competition and in reliance upon the status 
of the steel industry, as it has developed according to natural laws 
and conditions. 

Assuredly, this should not be done to give an advantage either, on 
the one hand, to the Chicago consumer or, on the other hand, to 
the manufacturer who happens to have steel plants located at both 
Pittsburgh and Chicago. 

It would also result in demoralizing the trade. If Chicago were 
made a basing point, the consequent detrimental results to producers, 
distributors, and consumers located in other districts would from 
time to time require the naming of other basing points until prac- 
tically every community commanding a substantial steel trade would 
have to be made its own basing point. This would mean chaos in 
the business, and it would be well-nigh impossible for either the 
producer, distributor, or consumer to make any intelligent com- 
parison of quotations or to ascertain n^arket prices. .^^ 



156 

In conclusion, we wish to emphasize that should the Federal 
Trade Commission fix the same base price for steel products at 
Chicago as at Pittsburgh it would itself thereby be fixing a price 
on steel products which it has no authority or jurisdiction to do 
under the act which creates it, and which action, in addition, would 
be a direct violation of the letter and spirit of the antitrust laws. 

Wherefore, The Youngstown Sheet & Tube Co. respectfully asks 
that no change be made in the basing point. 

Eespectfully submitted. 

The Xoungstowk Sheet & Tube Co., 
By J. A. Campbell, President. 

STATEMENT OF THE CHAMBER OF COMMERCE OF PITTSBURGH. 

PiTTSBtJKGHj Pa., August W, 1919. 
To the Chairman and Members 

Federal Trade Commission, 

Washington, D. G. 
Dear Sirs : Kindly permit us to place before you the statement of 
the Chamber of Commerce of Pittsburgh in regard to the applica- 
tion of the Western Association of Eolled Steel Consumers for a 
complaint against the United States Steel Corporation and others 
on the question of Pittsburgh as a basing point for steel, which 
statement is comprised in a joint report of our committees on trade 
and commerce and transportation and railroads, unanimously 
adopted by our board of directors and unanimously ratified by a well- 
attended special meeting of the members of this organization held this 
day as follows: 

Application has been made by the Western Association of Rolled Steel Con- 
sumers for a complaint against the United States Steel Corporation and others 
regarding the practice of using Pittsburgh as the sole basing point in quoting 
prices on steel. This subject was referred to your committees on trade and 
commerce and transportation and railroads, jointly, and your committees after 
careful consideration believe that the Chamber of Commerce should protest 
against any change being made in the basing point for the prices of steel for 
the following reasons: 
Whereas the Pittsburgh iron and steel district has always been the largest 

producer of iron and steel in the United States ; and 
Whereas it has by common usage been the practice of all manufacturers of 
iron and steel, on account of the great preponderance of production of iron 
and steel in the Pittsburgh district, to make Pittsburgh the basing point for 
prices of iron and steel; and 
Whereas the practice of making the Pittsburgh district the basing point for 
iron and steel, by reason of its very large production, existed by common 
usage many years before the United States Steel Corporation and other large 
steel interests were organized or located in the Chicago district ; and 
Whereas a basing point is a trade necessity looking to the development, stimu- 
lation, and stabilization of business and is necessary to enable the buyer to 
compare quotations; and 



157 

Whereas in establishing a basing point we are removing, as far as possible, 
obstacles to the free movement of merchandise from manufacturer to con- 
sumer, as when all prices are quoted f. o. b. the basing point a comparison 
of prices is all that is necessary, the freight being equalized ; and 

Whereas two or more basing points will work an injury to industry as a whole, 
will mean a division into districts, and interfere with the buyer placing his 
orders to advantage with the manufacturers best fitted to meet his neeids, 
thus restricting competition ; and 

Whereas Pittsburgh, first the sole basing point, is the foundation of the steel 
industry, and by reason of location and tonnage output is the logical sole 
basing point, Pittsburgh will always remain a basing point, and as two or 
more basing points tend to restrict competition, it should remain the sole 
basing point : Be it therefore 
Resolved, That the Chamber of Commerce of Pittsburgh file with the Federal 

Trade Commission its formal protest against any change being made in the sole 

use of Pittsburgh as a basing point in naming prices on iron and steel. 
Respectfully submitted. 

A. C. Teeey, Secretary. 

STATEMENT OF THE STARK ROLLING MILL CO. 

[the application by the Western Association of Rolled Steel Consumers for a complaint 
against the United States Steel Corporation and its subsidiary companies, hereinafter 
named, and the Inland Steel Co. and the Interstate Iron & Steel Co. and the Steel & 
Tube Co. of America.] 

Canton, Ohio, Augmt 26, 1919. 

Mr. ViCTOK MURDOCK, 

Acting Chairman Federal Trade Commission, 

Washington, D. C. 
Dear Sir : Our understanding is that the application described in 
the subject is based on the assumption that the old-established trade 
custom of using Pittsburgh, Pa., as a freight-basing point restricts 
competition and works an injustice on the signatories to the applica- 
tion. We consider that the complainant has failed to establish 
sufficient reason why the application should be given favorable con- 
sideration for the following reasons : 

1. The selfish reason is very apparent. 

2. The present users of rolled steel in all sections, at least the 
overwhelming majority of them, have established their business un- 
der the condition now complained of. A change now, therefore, 
would be a manifest injustice to such established industries. It 
would impose a hardship not considered and nonexistent when such 
industries were established. 

3. It is based on an erroneous assumption that such change would 
of necessity reduce prices. On the contrary, it would secure prac- 
tically a monopoly on western trade for the manufacturers of rolled 
steel located in what might be termed the Chicago district. 

4. It would restrict rather than increase competition, for the 
rolled-steel manufacturers located in eastern districts could not 
absorb the excess freight. 



158 

• ^. Assuming that the profit of all manufacturers of rolled steel 
should reach a point where it would be possible for them to assume 
such excess freight, competitive conditions in any event permit such 
absorption if the manufacturer so desires. 

6, The favored manufacturers of rolled steel in the Chicago dis- 
trict would not find it necessary to absorb the entire difference in 
freight, and the consumers would not, therefore, secure the benefit 
they imagine would be secured by this change. 

. 7. The application is unquestionably based on a misconception of 
facts. The custom of using Pittsburgh as a basing point is only a 
convenience which indicates to the possible buyer just exactly what 
he is actually paying for his goods regardless of where his factory or 
warehouse may be located. There is not and never has been, except 
by the direction of the Government during the late war, any uniform 
price on rolled-steel products, and no attempt has ever been made 
to establish a uniform price. Prices on these products are subject to 
competitive conditions and to variations in cost of production. When 
cost of production is in proper relation to market conditions there is 
nothing under present conditions to prohibit any manufacturer, no 
matter where the mill may be located, in absorbing the difference in 
freight east or west. In other words, there is no more reason whj'^ 
the Western Association of Rolled Steel Consumers should complain 
of a basing point at Pittsburgh than there is reason for eastern con- 
sumers of the same products to complain of a basing point estab- 
lished at Chicago. If there is any injustice to the western consumers 
with basing point established at Pittsburgh, there would be equal 
injustice to eastern consumers with a basing point established at 
Chicago. 

To sum up, the application is based, as stated, on an assumption 
of a condition which does not exist and which there is no probability 
will ever exist. 

Very truly. 

The Stakk Eolling Mill Co., 
John N. Remsen, 
Assistant General Sales Manager. 

STATEMENT OE THE MANSEIELD SHEET & TIN PLATE CO. 

Mansfield, Ofiio, August 13, 1919. 
Hon. Victor Muedock, 

Acting Ghairmam, Federal Trade CoTnmission, 

Washington, D. C. 

My Honoeable Sir: In response to the application from the 
Western Association of Rolled Steel Consumers for the issuance of 
a complaint by your commission against the United States Steel 



159 

Corporation and others, relating to " the practice of selling rolled 
steel on a Pittsburgh basing-point basis," we have this to say : 

The practice of using Pittsburgh as a basing point on all iron and 
steel shipments may possibly not be defended as a strictly logical 
principle, yet the custom dates back to the time when the industry 
really started in Pittsburgh. No doubt at all that was the cheapest 
point of production and the cheapest point for the assembling of raw 
material, hence the cheapest place for production. 

If the iron and steel industry should discontinue the use of Pitts- 
burgh as a basing point there is no logical reason why every com- 
munity in the United States where iron and steel are produced should 
not be made a separate basing point. 

If only the Chicago district were concerned, then a solution might 
be found. It requires no prescience to conclude that other regions 
such as Birmingham, Ala. ; Pueblo, Colo. ; Cleveland, Ohio ; Youngs- 
town, Ohio (and the entire Mahoning valley) ; many other points 
in the State of 01>io ; Philadelphia, Pa. ; Duluth, Minn. ; Wheeling, 
W. Va. ; Buffalo, N. Y, ; the New England section, and others will 
set forth claims for basing points. This would certainly bring about 
a very chaotic condition. Skilled labor on sheet and tin mills are 
compensated upon a sliding scale basis; as an example, when the 
price of sheet steel advances 5 cents per 100 pounds, the men's wages 
automatically advance 2^ per cent, and reductions accordingly. 
Therefore the wages of the thousands of men employed by the in- 
dustry are standardized, and if each locality should have a different 
basing point, you will readily see that it will be the means of bring- 
ing about a condition which will dissatisfy these men. The con- 
suming trade have established their business to meet the existing con- 
ditions, and any radical changes would certainly disturb all rela- 
tions with the mills as well as with all of the buyers. The ultimate 
result would be that every producer and consumer would be largely 
limited to their own particular zones, thus cut off largely from other 
centers by freight rates. In our own case, assuming Chicago as a 
basing point, we could not absorb the freight from Mansfield to 
Chicago district without loss. The establishment of Chicago as a 
basing point would certainly act as a hardship to every independent 
manufacturer of steel, and the only company which would have any 
advantages under such conditions would be the United States Steel 
Corporation, with its many subsidiary companies scattered in prac- 
tically all of the above-mentioned centers. This in itself is reason 
enough for not disturbing the present arrangement. While theoreti- 
cally every community should enjoy the advantages and suffer the 
disadvantages of its natural geographical location, other industries 
iiot having been established upon this basis, the question becomes 



oftfe of weighing the advantages which would be derived from a 
change against the disturbance which would result, especially at a 
time when the industries are faced with a solution of many disturb- 
ing factors resulting from war conditions. 

Your Commission no doubt will find this to be a more compli- 
cated matter to determine — what you must avoid doing than to 
determine what you ought to do if the way were clear. Almost any- 
thing you might be disposed to do would be likely to involve you 
in something else. For instance, if you should order Chicago district 
mills to sell f. o. b. Chicago at f. o. b. Pittsburgh price, you will be 
ordering one mill to sell at another mill's price. It might be difficult 
to draw a line and avoid, in substance, ordering one Pittsburgh mill 
to sell at another Pittsburgh mill's price. Eventually your Commis- 
sion would be fixing prices for the entire iron and steel industry. 
If there were deviations, whom would the Commission punish — 
those who sold below the set price or those who exacted a higher 
price ? 

Should the decision merely be that a mill must not quote on a 
remote basis, but only f. o. b. the respective mill, there would be a 
change in form but not in substance. The mills would take the 
Pittsburgh price, add the freight to destination point, deduct the 
freight from its mill, and quote the resulting price at the mill. 

Summing up the entire situation, no one is now injured when 
buying on one common basing point, viz, f. o. b. Pittsburgh. Why 
change? It seems advisable to leave well enough alone, making no 
attempt to destroy or change the established market center of the 
country. 

Yours very truly, 

The Mansfield Sheet & Tin Plate Co., 
F. W. Beach, General Manager of Sales. 

STATEMENT OE ATLANTIC STEEL CO. 

Atlanta, Ga., August £3, 1919. 
Hon. Victor Murdock, 

Acting ChairmoM Federal Trade Commission, 

Washington, D. C. 
Dear Sir: I am in receipt of copy of your letter of July 26 to 
E. H. Gary, Esq., president American Iron and Steel Institute, in- 
viting written statements from steel companies with reference to the 
complaint which has been filed with the Federal Trade Commission 
relative to the practice of selling rolled steel articles based on 
Pittsburgh. 

In this connection, I have just read copy of the statement dated 
August 13, 1919, which the Gulf States Steel Co., of Birmingham, 



161 

Ala., has filed with your commission. I do not see how 1 could mofe 
forcibly present this whole matter, so I wish to acquiesce in and 
make this statement a part of my answer in so far as it may apply. 

The Atlantic Steel Co. is located in Atlanta, Ga., 190 miles from 
Birmingham, Ala., the nearest source from whi^h it can procure its 
supplies of coal and iron. The distance from Pittsburgh to Atlanta 
is 788 miles. When this plant was built in 1906 it was contemplated 
that it would have an advantage in price over Pittsburgh equal to 
this difference in freight from Pittsburgh to destination and from 
Atlanta to destination. For instance, the rate on nails from Pitts- 
burgh to Montgomery, Ala., is 57 cents per 100 pounds, while the 
rate from Atlanta to Montgomery is 19 cents per 100 pounds, so that 
in selling nails in Montgomery this company will absorb a difference 
of 38 cents per 100 pounds. This practice also applies to the other 
products which this company makes, viz: Various wire products, 
bars, hoops, bands, cotton ties, etc. 

Using Pittsburgh as a basing point in selling steel is a custom or 
practice which has been established for many years, owing to the 
very great advantage which it had over other sections of the country 
in the assembling of raw materials and the organization which it 
had built upon around its mills. If it should be decided that Pitts- 
burgh can no longer be used as a basing point for steel products made 
in other sections of the country, it will work a great hardship upon 
this company, if not totally destroy its property, amounting to be- 
tween $4,000,000 and $5,000,000, for it is not in position and probably 
never will be to compete successfully with other sections that are 
more favorably located with reference to raw materials. This will 
also apply to a very large number of small mills located in various 
sections of the country remote from the Pittsburgh district and 
which never would have been built except for the advantage which 
they gained hj using Pittsburgh as a basing point. 

The building and operation of isolated mills remote from natural 
resources prevents congestion and expedites distribution of finished 
products, besides offering to communities employment which would 
not otherwise be the case, but all of this has been covered in the 
report referred to. 

In view of these facts, and the many other reasons mentioned in 
the report, I do not see how your honorable body can undertake to 
change a plan of operation which has worked successfully for a great 
number of years, and about which there can be and is so little com- 
plaint. All of which is respectfully submitted. 
Yours very truly, 

Thos. K. Glenn, President 
139378—19 ^11 



162 

STATEMENT OF THE WEST VIRGINIA KAIL CO. 

Huntington, W. Va., August 23^ 1919. 
Hon. Victor Murdock, 

Acting Chairman Federal Trade Commission, 

Washington, D. C. 

Dear Sir : A copy of your favor of the 26th ultimo, addressed to 
E. H. Gary, Esq., president American Iron and Steel Institute, has 
been sent us, and we wish to voice our objection to moving the basing 
point on steel products from Pittsburgh. 

For your information we beg to advise that our plant is one which 
buys all of its raw material and has practically no source of raw 
material except from points located far away from the plant. 

Our raw material is old rails purchased from railroad companies, 
and at this particular time shell steel purchased at the different points 
located in mills and ports of shipment. 

In other words, we are compelled to pay an incoming freight on 
almost every pound of material which we roll. 

We are in competition with other mills for the purchase of this 
material, some of these mills being located at Pittsburgh, and if we 
were not in position to take advantage of our location with reference 
to freight on the sale of some of our products it would be very in- 
jurious to us, and at times this difference is more than the actual 
profit made by us on some of the material which we sell. 

For instance, only a week or two ago we purchased a lot of shell 
steel which was located in the Pittsburgh district and on which we 
had to pay a freight of $3 per ton. 

Now, if we had to sell the finished product coming from this mate- 
rial without getting the advantage of our location in freight and 
would have to compete with Pittsburgh mills selling at the same 
price f. o. b. mill as the Pitsburgh concern, you can readily see that 
we would not have been able to purchase this material and ship it 
into Huntington, and this would also apply to most of the material 
bought by us. And, as stated above, unless we had this advantage in 
spiling in this district we would practically be put out of business. 

We feel that if a basing point is changed from Pittsburgh to some 
other point and a precedent established it would not be long until 
some other community would want a basing point there also, and 
in a short time each mill would be a basing point and all material 
would be sold f. o. b. the mill at wherever point, all prices being the 
same. 

We feel that this is an economic question and that these prices 
are adjusted by economic conditions and conditions of supply and 
demand and competition, and we do not feel that any arbitrary 
action should be taken to make an arbitrary basing point and re- 
move it from Pittsburgh. 



163 

We do not think that the Pittsburgh basing point is one that has 
been arbitrarily made, at least we have no knowledge to this effect, 
and we believe that the Pittsburgh basing point is one that is 
brought about naturally by the conditions, and we are of the opinion 
that it can not be changed by any arbitrary action, as it would be 
against the economic laws to do so. 

Our plant is very much freight ridden on incoming material, bat 
it is located here because it serves a territory better than plants 
farther removed, and if it were not in position to get the advantage 
of it's location on finished materials, I don't believe it would continue 
to operate, because this advantage only offsets a disadvantage of the 
incoming material. 

Very truly yours, 

The West Virginia Eail Co., 
D. C. ScHONTHAL, Solcs Manager. 

STATEMENT OF CKAWEORDSVILLE WIRE & NAIL CO. 

Crawfordsville, Ind., August 21^ 1919. 
Mr. Victor Murdock, 

Acting Chairman Federal Trade Commission, 

Washington, D. C. 
Dear Sir : Relative to j^our circular letter of July 26, copy of which 
we have just received from the American Iron and Steel Institute, 
regarding the Pittsburgh freight basing point, beg to advise that we 
believe if Pittsburgh basing point was discontinued it would work 
a hardship on the smaller manufacturers who purchase their raw 
material. 

The Pittsburgh basing arrangement has worked so satisfactorily 
for years, and the trade is accustomed to figure their delivered prices 
based on Pittsburgh, that several basing points to work on would 
work a hardship on the retailer as well as the manufacturer and 
jobber, and as we see it a manufacturer could not expand and could 
only take such business as he might be in position to secure in near-by 
territory or equalize freight with the nearest basing point such 
as Chicago. 

In our case we would have to pay freight on our steel from 
Chicago district to our city, ship it back again finished,, and sell 
at a delivered price, or equalize freight. This would probably net 
us a loss on the close margin we are compelled to operate. 

We believe that changing the basing point from Pittsburgh to 
Chicago or any other western point would disrupt the entire steel 
industry. 

Yours truly, 

Ckawfordsville Wire & Nail Co., 
C. D. VoRis, General Manager. 



164 

STATEMENT OE THE READING IRON CO. 

Reading, Pa., August 19, 1919. 
Hon. Victor Muedock, 

Acting Chairman the Federal Trade Commission, 

Washington, D. C. 
Gentlemen : In reference to the complaint received by your 
honorable Commission from the Western Association of Rolled 
Steel Consumers regarding the discontinuance of Pittsburgh as 
a basing point, I beg to advise that the continuance of this practice 
is of vital importance to this company. 

The raw material consumed by us in the manufacture of our 
product, which consists of wrought-iron pipe and tubing, comes 
almost exclusively from the coal regions of western Pennsylvania 
and the ore mines of the Lake regions, placing us at a distinct dis- 
advantage with our principal competitiors, all of whom are located 
in the Pittsburgh district. Furthermore, 75 per cent and upward 
of our finished product is shipped to the West and Southwest, 
passing through Pittsburgh, placing us at a further disadvantage in 
the matter of freight in the distribution of our product as compared 
with our competitors. 

We are pleased to note that we may have the opportunity of at- 
tending the public hearings in this matter and trust that our plea 
will have the consideration of the Commission. 
Yours very truly, 

L. E. Thomas, President. 

STATEMENT OF BETHLEHEM STEEL CO. 

(Fa the matter of the application of the Western Association of Rolled Steel Consumers 
for a complaint against the United States Steel Corporation and others.] 

Before the Federal Trade Commission. 

Bethlehem Steel Co., by leave and at the suggestion of the Federal 
Trade Commission, files -this statement with reference to the appli- 
cation of the Western Association of Rolled Steel Consumers for a 
complaint against United States Steel Corporation and others, and 
says : 

The question presented by the petition herein affects the follow- 
ing three classes of manufacturers of iron and steel: 

{a) Those whose only mills are in the Chicago district, such as 
Inland Steel Co., Interstate Iron & Steel Co., and Steel & Tube Co. 
of America, which are named as respondents in the petition; 

(&) Those whose only mills are in the Pittsburgh district or in 
other districts east of the Chicago district, such as Jones & Laughlin 
Steel Co., Bethlehem Steel Co., Cambria Steel Co., Lackawanna 
Steel Co., and Republic Iron & Steel Co. ; and 



165 

(c) Those which have mills in both the Pittsburgh district and the 
Chicago district or which have subsidiaries that have mills in the 
Pittsburgh district and other subsidiaries that have mills in the 
Chicago district. United States Steel Corporation seems to be the 
only company coming within this class. 

This statement is prepared from the point of view of the manu- 
facturers of class (&) ; that is, those who do not have mills in the 
Chicago district. 

I. 

The use of the so-called " Pittsburgh base " is simply a convenient 
method of quoting prices, and the abolishing of that base or the 
establishing of other bases would not affect prices but would cause 
confusion and inconvenience in the steel industry. 

There seems to be a great deal of confusion of thought with the 
petitioner herein about the purpose and effect of the use of the so- 
called " Pittsburgh base " in connection with the prices of steel and 
iron. As a matter of fact the use of the Pittsburgh base has nothing 
whatever to do with, and has no influence upon, the prices which 
manufacturers of steel charge for their products. It is simply a 
convenient method of quoting prices — convenient to both the manu- 
facturer and the purchaser. Its use in no way affects the freedom 
of each manufacturer to make any price he chooses in any territory. 

In using the Pittsburgh base in quoting prices the manufacturer 
simply states to a prospective customer in a given territory in effect 
that the price of the product offered is so many dollars per ton plus 
an amount equal to the freight between Pittsburgh and the point of 
delivery. The use of this base gives precisely the same result to 
customers as if each manufacturer were to quote prices f. o. b. the 
point of delivery or f. o. b. mill, because in any case the ultimate 
price would be computed on the basis of the price at the mill plus 
freight to the point of delivery. The objection to quoting prices 
f. o. b. the point of delivery is that manufacturers would have to 
make extended computations based on varying freight rates. The 
objection to quoting prices f. o. b. mill is that similar computations 
would have to be made by the customers before they would be able 
to compare quotations. With the use of the Pittsburgh base, how- 
ever, manufacturers can readily make quotations, and customers can 
compare with equal ease the quotations of different manufacturers, 
since the freight from Pittsburgh to a given point is the same for 
each customer. 

Manifestly, if a manufacturer in the Pittsburgh district wishes to 
make a low price for delivery in the Chicago district in order to take 
the business from the mills in that district, all he has to do is to make 
la low price f. o- b. Pittsburgh, His freedom to make a low price is 



166 

just as great when the price consists of a price at Pittsburgh and the 
freight to the point of delivery has to be added as when it consists of 
a price at the point of delivery in which the freight is included, al- 
though not shown as a separate item. 

If the use of the Pittsburgh base in quoting prices were abolished, 
prices paid by the customers would, upon the last analysis, be m'ade 
up in just the same manner as before; that is, in every case they 
wculd include two elements — the price which the manufacturer fixes 
for his product at his mill and the freight to the point of delivery. 

The chai'ge that the use of the Pittsburgh base in quoting prices is 
the result of a combination or understanding between steel manu- 
facturers hardly calls for serious consideration. Bethlehem Steel Co. 
does not have any agreement or understanding amounting to an 
agreement with any one or more of the respondents named in the 
petition herein, or with any other producer of steel, for or covering 
discrim^inations in price between purchasers of rolled steel in the 
Pittsburgh district or elsewhere or for the maintenance of prices of 
rolled steel in .and throughout the Chicago district to members of the 
petitioner herein or to other consumers in such district ; nor does it 
believe that any such agreement or understanding between said re- 
spondents, or any of them, or between any of them and any other 
producer or producers of steel exists. 

The Pittsburgh base has been used in quoting prices almost from 
the beginning of the steel trade in this country and is thoroughly 
understood by both manufacturers and purchasers. It is a matter of 
common knowledge that the custom of quoting prices f. o. b. Pitts- 
burgh was established more than half a century ago, when practically 
all the steel of the country was manufactured at Pittsbui'gh. It has 
been continued to the present time by force of habit and custom as 
well as because of its convenience to all concerned, notwithstanding 
the development of new centers for the manufacture of steel at Chi- 
cago and elsewhere. It fits present conditions because in normal times 
the Pittsburgh district is still the largest producer of iron and steel 
in the country. 

It is therefore submitted that to forbid the use of the Pittsburgh 
base in quoting prices for steel and iron products would resvilt merely 
in great inconvenience to the steel trade, not only to manufacturers 
but to purchasers, and would benefit no one. 

II. 

The real question raised by the petition is whether it is unlawful 
for a manufacturer who has mills in both the Chicago district and 
the Pittsburgh district to sell the products of his Chicago mills in 
the Chicago district at prices higher than those at which he sells the 



. 167 

products of his Pittsburgh mills in the Pittsburgh district, although 
the cost of the products in both districts is the same. 

As we understand the petition and the matters complained of, the 
real question raised is not the propriety of using the Pittsburgh base 
in quoting prices for rolled-steel products, but is found in the 
charge that the respondents discriminate in the price of such prod- 
ucts in favor of competitors of members of the petitioner herein who 
are located in the Pittsburgh district or the territory east of the 
Chicago district and against such members and other consumers of 
rolled-steel products located in the Chicago district in violation of 
section 2 of the Clayton Act, it being asserted that the effect of 
such discrimination may be substantially to lessen competition or 
tend to create a monopoly in the particular line of commerce. We 
do not believe that respondents, Inland Steel Co., Interstate Iron & 
Steel Co., and Steel & Tube Co. of America, which have mills only 
in the Chicago district, quote different prices to different purchasers 
within any given district which come within the prohibition of 
such section 2, although such prices may be the cost of the production 
of the products plus freight from Pittsburgh to the point of destina- 
tion. If this be so, then the charge applies only to United States 
Steel Corporation (assuming, as charged, that its subsidiaries, Illinois 
Steel Co. and Carnegie Steel Co., act under its direction and control), 
because its subsidiaries in the Chicago district sell the products of 
their mills to consumers in that district at prices higher than is 
charged for the products of its subsidiaries in the Pittsburgh dis- 
trict to consumers in the Pittsburgh district, although, as is alleged, 
the cost of production is no greater in the Chicago district than in the 
Pittsburgh district. 

It is apparent that this charge against United States Steel Cor- 
poration in no way involves the propriety of the use of the Pitts- 
burgh base in quoting prices, because the result would be the same 
.whether the price charged in the Chicago district were (a) the price 
charged in the Pittsburgh district plus $5 as the freight from Pitts- 
burgh to Chicago, or (h) a price $5 per ton higher than the price 
for the same product in the Pittsburgh district. The resulting price 
to the consumer would be the same in either case. 

We are, therefore, brought face to face with the question whether 
the practice of United States Steel Corporation (treating the matter 
as if it owned and operated the mills of its subsidiaries) in charg- 
ing higher prices for its products in the Chicago district than it 
charges in the Pittsburgh district is in violation of section 2 of the 
Clayton Act. For the reasons stated in Subdivision V hereof, the 
decision of this question will vitally affect the steel manufacturers 



168 

whose mills are in other districts and the steel trade and business 
generally. 

III. 

If the practice complained of be declared a violation of section 2 
of the Clayton Act the effect would be to prevent a manufacturer 
from taking advantage of the favorable location of his mills with 
respect to his competitors and the operation of the law of supply and 
demand, to fix prices and to restrain rather than promote competi- 
tion. 

It seems too clear for argument that a manufacturer whose only 
mill is in the Chicago district is free to charge any price he can obtain 
under the competitive conditions prevailing in that district, even 
though his profit be larger than that of the manufacturer in the 
Pittsburgh district who sells his product in that district or in the 
Chicago district, provided, of course, that the effect of any dis- 
crimination in price (if it shall not be within the exceptions stated 
in section 2 of the Claji^on Act) may not be substantially to lessen 
competition or to tend to create a monopoly. Presumably the pur- 
pose of the manufacturer in locating his mill in the Chicago district 
was to gain an advantage over the manufacturer whose mills were 
located in the Pittsburgh district or elsewhere at a considerable dis- 
tance from Chicago and who in making prices for the Chicago district 
has to consider the item of freight. 

It is equally clear that the manufacturer whose mill is in the Pitts- 
burgh district is free to make any price that may be necessary to 
effect the sale of his products in the Chicago district under the com- 
petitive conditions prevailing in that district, even though that price, 
less the freight from Pittsburgh to Chicago, be lower than his Pitts- 
burgh price, because the effect of such sales can hardly -be to lessen 
competition or to tend to create a monopoly. He is certainly free to 
make any reduction in price necessary to meet the competition of the 
manufacturers of the Chicago district; otherwise, there would be a 
restriction of competition and the manufacturers having mills in the 
Chicago district would have an unfair advantage. 

The same results should follow in the case of a manufacturer who 
has plants in both the Pittsburgh district and the Chicago district. 
Such manufacturer should be free to secure for the products of his 
mill in the Chicago district the best prices obtainable under the com- 
petitive conditions in that district, even though the products of his 
mill in the Chicago district are sold at higher prices and at better 
pi'ofit than the products of his Pittsburgh mills marketed in the 
Pittsburgh district. 

If United States Steel Corporation can get a higher price in the 
Chicago district for the products of its mills in the Chicago district 



169 

than for the products of its mills in the Pittsburgh district, it is not 
because of the Pittsburgh base, but because competitive conditions 
make the higher price possible. The fact is that the mills in the 
Chicago district do not supply even one-half of the steel consumed 
in that district. The remainder must come from the mills outside 
of that district, chiefly those in the Pittsburgh district; the cost of 
the products of which to consumers in the Chicago district must of 
necessity include the freight from the mills to the point of delivery 
in the Chicago district. Therefore, in normal times the prices 
charged by the manufacturers in the Pittsburgh district for their 
products delivered in the Chicago district will necessarily control 
prices in the Chicago district, even though the result may be that 
the manufacturers in the Chicago district make a larger profit upon 
their product than is made by those in the Pittsburgh district. 

If the time shall ever come when the mills in the Chicago district 
have sufficient capacity to supply all the needs of that district and 
can continue to manufacture as cheaply as the mills of the Pitts- 
burgh district, then the owners of the mills in the Chicago district in 
normal times will naturally have the trade of that district to them-, 
selves and the owners of the other mills will be excluded from 
competition. 

It thus appears that the difficulty which the Chicago district fabri- 
cators experience in doing business outside of their own territory is 
due not to the effect of the use of the Pittsburgh base in quoting 
prices or to any discrimination in price on the part of the manufac- 
turers against the Chicago district, but to the fact that their fabri- 
cating plants are located in the Chicago district, which does not 
produce enough steel to supply their demands, and the fact that steel 
shipped from Pittsburgh (from which a very large part of the steel 
consumed in the Chicago district must come) costs in the Chicago 
district several dollars more per ton to the manufacturers than steel 
produced at mills in the Chicago district. Such fabricators are able 
to compete in the Chicago district on somewhat better than equal 
terms with the eastern fabricators, because the freight rate paid by 
the eastern fabricators upon their finished product from their mills 
to points in the Chicago district is higher than the freight rate paid 
by the Chicago fabricators on the steel which enters into their 
finished product. 

IV. 

What the members of the petitioner desire is a fixing of prices 
which will result in enlarging their field of competition and narrow- 
ing the field of competition of their competitors, this without refer- 
once to the effect upon competition generally. 



170 

In the last analysis, what the Chicago fabricators are seeking is 
not to secure relief from a discrimination in price against them, but 
to secure a discrimination in price in their favor, so that they may 
be able to enlarge their territory and overcome the handicap now 
resulting from the fact that the price of steel Is higher in Chicago 
than in Pittsburgh, a handicap which, as has been already pointed 
out, is due solely to competitive conditions and not to any arbitrary 
fixing of prices by the manufacturers or to discrimination. A fab- 
ricator in St. Louis, where there is no steel mill, might with equal 
justice complain of his inability to compete with the Chicago fabri- 
cator because the cost of his fabricated steel to the Chicago consumer 
would necessarily be- increased by the freight from St. Louis to 
Chicago. 

The members of the petitioner obviousl}^ desire to be able to buy 
at the Pittsburgh price all the steel produced in the Chicago district, 
and to buy from the Pittsburgh district at the Pittsburgh price, plus 
freight, enough additional steel to meet their demands. As the 
freight rate on rolled steel is less than that on fabricated steel, it 
would be impossible for Pittsburgh fabricators to compete in the 
Chicago district at all. The members of the petitioner, on the con- 
trary, would then have not only a protective tariff amounting to the 
difference between the freight rate on rolled steel and that on fabri- 
cated steel, but also, to the extent that they could purchase rolled steel 
in the Chicago district at the Pittsburgh price, a protective tariff 
amounting to the entire freight rate on fabricated steel from Pitts- 
burgh to Chicago. They would thus be able to establish a complete 
monopoly in their district, and it may well be' questioned whether 
they would not resist any attempt to restrict their selling price to 
cost plus a reasonable profit. 

If United States Steel Corporation were forbidden to sell in the 
Chicago district the output of its mills in that district at a price 
higher than that at which it sells in the Pittsburgh district the 
output of its mills in that district, or, to put it more positively and 
concretely, were required to sell in the Chicago district the products 
of its mills in that district at a price not to exceed cost plus a rea- 
sonable profit, the result to the members of the petitioner would not 
be what they seek. What the result would be would depend on where 
United States Steel Corporation sold the products of its mills in the 
Chicago district. If it chose to sell those products to consumers out- 
side of the Chicago district, the condition complained of would con- 
tinue, or would, perhaps, be made worse. If it chose to sell to con- 
sumers in the Chicago district, the effect would be to lessen competi- 
tion. The other manufacturers in the Chicago district would not find 



171 

it necessary to lower their prices until the capacity of the mills of 
United States Steel Corporation in the Chicago district should be 
increased, so that their products would be sufficient substantially to 
meet the demand of tliat district, for they could continue with their 
existing prices to compete successfully with the manufacturers in 
the Pittsburgh district and other districts east of the Chicago dis- 
trict. Until such mills had so increased their capacity, competition 
between fabricators in the Chicago district would be very much dis- 
turbed and confused, if not substantially lessened: First, because 
only favored fabricators would get the lower priced steel, with the 
result that instead of all the fabricators being in competition for 
construction work in the Chicago district they would be divided into 
two classes, the favored fabricators and the others, the second of 
which could not compete with the other ; and, secondly, because, 
with the price of steel in the Chicago district fixed lower than the 
la,w of supply and demand requires, the tendency would be to pre- 
vent the manufacturers (other than United States Steel Corpora- 
tion) whose mills are outside of the Chicago district and who now 
compete with the manufacturers whose mills are located in the 
Chicago district from continuing to bid for the Chicago business. 
By reason of this shrinkage in their source of supply the fabricators 
in the Chicago district would find that their field of competition was 
a correspondingly more restricted one and that such increased re- 
striction would continue, at least vmtil the supply of the mills of 
United States Steel Corporation in the Chicago district had been 
exhausted. 

Even if all the manufacturers in the Chicago district could be re- 
quired to sell at the lower price, it is apparent that in normal times 
the same unfavorable conditions would obtain. Although the con- 
fusion at such times might be somewhat less, it would still exist, 
and not only the fabiicators but the ultimate consumers, i. e., the 
owners, would experience unnatural and unfair results. One owner 
putting up a building, whether for purposes of sale or rent, would 
necessarily have to pay more for his building than another, because 
the one would have to pay more for his steel than the other. The 
latter will have been artificially favored. 

It is submitted that the law of supply and demand should not be 
disturbed and that the incentive to invest money in steel mills in the 
Chicago district should not be diminished. The policy of our laws 
has been to allow the law of supply and demand the fullest play and 
to protect its operation from the interference of artificial influences. 
The petition herein seeks to disturb it, and we believe that injury is 
bound to result. 



172 



Why steel producers generally are interested in the decision of the 
question involved. 

The question may be asked whj'^ the steel manufacturer whose only 
mills are in the Pittsburgh district or elsewhere outside of the Chicago 
district is interested in the question involved herein, inasmuch as the 
granting of the relief sought would affect only United States Steel 
Corporation, which through its subsidiaries has mills in both the 
Pittsburgh and Chicago districts. The answer is simple. The mills 
of manufacturers of iron and steel have been located at the particular 
places because their owners have seen some advantage in locating them 
there. This advantage may be because of nearness to the ore or coal 
supply, or because of favorable transportation rates on raw material 
or finished products, or because the supply of finished products manu- 
factured in a particular district was small compared with the demand 
therefor. Undoubtedly most of these reasons caused the owners of 
the mills in the Chicago district to locate them there. A prohibition 
against taking advantage of a favorable location could not be limited 
to United States Steel Corporation in respect of the mills of its sub- 
sidiaries in the Chicago district, and if it should be decided that none 
of the manufacturers in that district can be allowed to take advantage 
of their favorable location or, in other words, that the operation of 
the law of supply and demand must be restricted, then similar appli- 
cations by consumers of steel in other districts would inevitablj'^ follow 
with similar decisions, and similar confusion and disturbance would 
result all over the country. 

This precedent, once established, could not be limited in its applica- 
tion to manufacturers of iron and steel, but on applications which 
would surely be made by consumers of other products would neces- 
sarily have to be applied to other manufacturers, with the result that 
the natural laws upon which business has been founded since the 
beginning of civilization would be upset. The effect of such a 
decision would be far-reaching. The advantages which induce in- 
vestments in plants being negatived, loss of such investments to a 
considerable extent at least would follow and business chaos might 
well be expected. 

The effect of the application of such a precedent upon the structure 
of the freight rates of the country should also be considered. That 
structure has been built up with a view to promoting competition by 
equalizing competitive conditions to the largest extent consistent with 
the interests of the carriers. If the principle upon which the granting 
of the relief sought by the petitioner herein must be based were logi- 
cally applied to all the business of the country, a readjustment of 
freight rates would necessarily follow and the confusion mentioned 
above would be greatly increased. 



1T3 

We sincerely trust that this Commission -will not venture even a 
short way upon such a course, but Avill promptly decide that the busi- 
ness success of the country requires that the freest play be given to the 
law of supply and demand and will, therefore, dismiss the application 
herein. 

Dated August 28, 1919. 
Respectfully submitted. 

Bethlehem Steel Co., 
ByE. G. Grace, President. 
Ceavath & Henderson, 

Council, 62 William Street, New Yorh City. 

PROTEST OF THE TKUMBULL STEEL CO., OF WARREUr, OHIO. 

[In the matter of the application for a complaint and a change in the Pittshm-gh hasing 

point for steel products.] 

To the Honorable the Federal Trade Commission of the United 

States : 

The Trumbull Steel Co., of Warren, Ohio, a manufacturer of open- 
hearth ingots, blooms, billets, slabs, and sheet bars, sheet and tin-mill 
products of every description, black and galvanized sheets, formed 
roofing products, tin and terne plate, blue annealed sheets, long 
terne sheets, hot and cold rolled strip steel, producing 300,000 tons of 
such products annually, and whose plant is situated at Warren, Ohio, 
less than 15 miles west of Youngstown, makes this its protest against 
the establishment of Chicago as a basing point in addition to Pitts- 
burgh, or in changing said basing point therefrom, and as its grounds 
and reasons therefor says that the entire steel trade in its natural 
development has been located and builded upon the Pittsburgh bas- 
ing point; that this established custom grew up to remedy the con- 
fusion that had long existed by having other and different basing 
points variously situated. 

This company was organized in 1912, long after the custom had 
grown up in the development of the steel business, and had become 
an established law of the business and a fixed rule of the trade. In 
reliance upon this tried and fixed custom, the plant of this company 
was located in the Pittsbu.rgh district at Warren, Ohio, 80 miles 
west of Pittsburgh, and has since been enlarged, extended, and im- 
proved until it now has a paid in capital of $20,000,000 and employs 
over 5,000 men. 

Its success has been due to its location and its access to the Chicago 
and western markets. A change of the basing point would result in 
the confusion that existed before the establishment of the present 
practice, which has been found so fair and advantageous, and in the 
consequent loss and disadvantages to the business of this and other 



174 

companies grounded upon it. The present practice is violative of no 
statutory law now or at any time existing, and is not productive of 
unfair competition in any sense. The change of the tried and long- 
existing basing point, if attended with any benefits whatever, would 
result in infinitely more harm with its resultant damages and losses 
than any probable or possible good. 

Wherefore, The Trumbull Steel Co. desires to enter this, its pro- 
test, and respectfully asks that no change be made. 
Respectfully submitted. 

The Trumbull Steel Co., 
By Wm. W. McTate, 

Vice president. 

STATEMENT OE THE BOLT, NUT & KIVET INSTITUTE. 

Pittsburgh, Pa., Septeml^er S, 1919. 
Hon. Victor Murdock, 

Acting Chairman Federal Trade Commission, 

WasJiington, D. C. 
Dear Sir: On behalf of the Bolt, Nut and Rivet Institute, I beg 
leave to say : 

The membership of institute is attached hereto. 

1. The members of the institute are buyers of rolled-steel products 
to the extent of over 594,941 net tons per annum. 

2. The members of the institute are sellers of finished bolts, nuts, 
and rivets to the extent of over $65,000,000 per annum. 

3. At the regular meeting of the institute held in Pittsburgh 
August 20, 1919, there were represented 23 companies, as per attached 
list. Fifteen members were unrepresented, probably on account of 
the midsummer period. 

4. The 23 companies represented voted unanimously and without " 
an expression of a single qualifying comment in favor of the follow- 
ing propositions : 

A. As buyers of rolled-steel products, the industry favors Pittsburgh as the 
sole basing point. 

B. As sellers of finished products, the industry favors Pittsburgh as the sole 
basing point. 

5. The reason why the industry favors Pittsburgh as against Chi- 
cago or any other single basing point is because the iron and steel 
industry has long been accustomed to Pittsburgh as a basing point 
and many plants producing both raw and finished materials have 
been established on the assumption that Pittsburgh is and would 
continue to be its basing point. 

6. Otherwise there would be no particular objection to using Chi- 
cago or any other conveniently located city as a basing point. But 



175 

there are serious objections to the using of more than one basing 
point. 

Probably all buyers of iron and rolled-steel products will agree 
that if there is to be one basing point it should be Pittsburgh, and 
the overwhelming majority will agree that there should be but one 
basing point. 

Yours very truly, 

The Bolt, Nut and Eivet Institute. 
N. J. Clarke, President. 
By C. M. Best, Secretary. 

MEMBEES OF THE BOLT, NUT AND EIVET INSTITUTE. 

American Equipment Co., Norristown, Pa. 

Atlas Bolt & Screw Co., Cleveland, Ohio. 

Bayonne Bolt & Nut Co., Bayonne, N. J. 

Bethlehem Steel Co., Bethlehem, Pa. 

Bourne-Fuller Co., Cleveland, Ohio. 

Boss Nut Co., Chicago, 111. 

Buffalo Bolt Co., Buffalo, N. T. 

Champion Rivet Co., Cleveland, Ohio. 

Clark Bros. Bolt Co., Milldale, Conn. 

Columbus Bolt Works Co., Columbus, Ohio. 

Falls Rivet Co., Kent, Ohio. 

Foster Bolt & Nut Manufacturing Co., Cleveland, Ohio. 

Garland Manufacturing Co., West Pittsburgh, Pa. 

Graham Nut Co., Pittsburgh, Pa. 

Hoopes & Townsend Co., Philadelphia, Pa. 

Illinois Car & Manufacturing Co., Hammond, Ind. 

Interstate Iron & Steel Co., Chicago, 111. 

Kansas City Bolt & Nut Co., Kansas City, Mo. 

Kirk-Latty Manufacturing Co., Cleveland, Ohio. 

Lake Erie Bolt & Nut Co., Cleveland, Ohio. 

Lamson & Sessions Co., Cleveland, Ohio. 

E. B. Lanman & Co., East Chicago, Ind. 

Lebanon Valley Iron & Steel Co., Lebanon, Pa. 

Maryland Bolt & Forge Co., Baltimore, Md. 

Michigan Bolt & Nut Works, Detroit, Mich. 

Milton Manufacturing Co., Milton, Pa. 

National Screw & Tack Co., Cleveland, Ohio. 

Neely Nut & Bolt Co., Pittsburgh, Pa. 

Pittsburgh Rivet Co., Pittsburgh, Pa. 

PottsviUe Bolt Co., Pottsvllle, Pa. 

Reed & Prince Manufacturing Co., Worcester, Mass. 

Russell, Burdsall & Ward Bolt & Nut Co., Port Chester, N. Y. 

Scranton Bolt & Nut Co., Scranton, Pa. 

Sandusky Nut Co., Sandusky, Ohio. 

St. Louis Screw Co., St. Louis, Mo. 

Standard Bolt Co., Columbus, Ohio. 

S. Severance Manufacturing Co., Glassport, Pa. 

Upson Nut Co., Cleveland, Ohio. 



Its 

MEMBERS PRESENT AT MEETING OF THE BOLT, NUT, AND RIVET INSTITUTE HELD AT 
THE WILLIAM PENN HOTEL WEDNESDAY, AUGUST 20, 1910. 

American Equipment Co., Norristown, Pa. 

Bayonne Bolt & Nut Co., Bayonne, N. J. 

Bethlehem Steel Co., Bethlehem, Pa. 

Bourne-Fuller Co., Cleveland, Ohio. 

Buffalo Bolt Co., Buffalo, N. Y. 

Champion Rivet Co., Cleveland, Ohio. 

Clark Bros. Bolt Co., Milldale, Conn. 

Columbus Bolt Works Co., Columbus, Ohio. 

Falls Rivet Co., Kent, Ohio. 

Foster Bolt & Nut Manufacturing Co., Cleveland, Ohio. 

Graham Nut Co., Pittsburgh, Pa. 

Kansas City Bolt & Nut Co., Kansas City, Mo. 

Kirk-Latty Manufacturing Co., Cleveland, Ohio. 

Lake Erie Bolt & Nut Co., Cleveland, Ohio. 

E. B. Lanman & Co., East Chicago, Ind. 

Michigan Bolt & Nut Works, Detroit, Mich. 

Milton Manufacturing Co., Milton, Pa. 

National Screw & Tack Co., Cleveland, Ohio. 

Pittsburgh Rivet Co., Pittsburgh, Pa. 

Russell, Burdsall & Ward Bolt & Nut Co., Port Chester, N. T. 

Scranton Bolt & Nut Co., Scranton, Pa. 

Standard Bolt Co., Columbus, Ohio. 

Upson Nut Co., Cleveland, Ohio. 

STATEMENT OF THE EASTERN STEEL CO. 

PoTTSviLLE, September 15, 1919. 
Victor Murdock, Esq., 

Acting Chairman Federal Trade Commission, 

Washington, D. C. 
Dear Sir: We have your acknowledgment of September 5 of the 
receipt of a copy of our letter addressed to Judge Gary upon the 
subject indicated above. Having received the inquirj^ from Judge 
Gary, our response was addressed to him. Otherwise we would have 
set our views directly before the Commission. 

We believe there can be no doubt as to the general demoralization 
that is likely to follow the abolition of the basing-point plan. As 
it is now believed better results for consumers follow selling prices 
for raw materials which are maintained within reasonable limits 
of variation, it seems clear that removal of the steadying influence 
of the basing point must necessarily result adversely for the buyers. 
We strongly deprecate the removal of the basing-point method and 
believe that the interests of the public would be best served by the 
continuance of the present conditions. 
Yours very truly, 

The Eastern Steel Co., 
By E. L, Herndon, Treasurer. 



177 

STATEMENT OF THE EASTERN STEEL CO. 

PoTTsviLLE, Pa., August 30, 1919. 
Elbert H. Gaey, Esq., 

President American Iron and Steel Institute, 

61 Broadway, New York City. 

Deae Sir: Your circular letter of August 4, accompanied by a 
copy of a letter addressed to you, under date of July 26, b}- Hon. 
Victor Murdock, acting chairman, has been received. 

Mr. Murdock's letter relates to a communication received from 
the Western Association of the Rolled Steel Consumers, in which 
certain allegations relating to the practice of selling rolled steel on. 
the Pittsburgh basis are made. 

There are many plants where it is necessary to assemble raw mate- 
rials from remote points of origin. Iron ores and coke, in the case of 
blast furnaces, and coal, in the case of steel works, are widely sepa-. 
rated and are brought together at what have seemed to be the best 
locations for the manufacture of the finished product from these raw 
materials. All of these industries have grown up imder the present bas- 
ing-point system. Much hardship would follow in these cases should 
the present system be abolished without opportunity to attempt to 
find some method of compensation of the loss which would result. 

It is of greater importance, however, to give consideration to the 
situation of the purchasers and users of rolled steel as affected by 
any change in the present basing point. As the present custom of 
stipulating Pittsburgh base has been in existence for a very long 
time, all buyers are accustomed to it and would regard any change 
with disfavor unless it was obvious that it Avould operate to their 
notable advantage. It seems reasonabl.y plain that if additional 
basing points are established the buyers in the immediate vicinity of 
an}' specified basing point will not benefit in consequence. The pro- 
ducers in such an area will undoubtedly sell their merchandise for' 
the maximum obtainable. This would naturally be limited by the 
price at which producers in other basing-point areas could make 
delivery to buyers in the district first mentioned. If a number of 
basing points are established, we maj- confidently expect to presently 
see as many basing points as there are producing plants. The natu- 
ral consequences of this would be diversit}' of opinion as to selling- 
price and the probable impossibility of maintaining prices at anj- 
generally recognized level. It seems to us apparent that consumers 
of rolled steel not only would not benefit by such a proposed change, 
except in perhaps a few isolated cases. We may naturally expect a 
less desirable situation than now exists. 

We wish to enter our earnest f)rotest against making any change- 
which will result in diminishing the usefulness of Pittsburgh base 

139378—19 12 



178 

ill the territorj'- east of Pittsburgh. If a hearing is to be given by the 
Federal Coinniission, we would like to have the privilege of having a 
representative present. 
Yours very truly, 

The Eastern Steel Co., 
By E. L. Hern DON, Treasurer. 

STATEMENT OF MeKEESPORT TIN" PLATE CO. 

[In the matter of the application of the Western Association of Rolled Steel Consumers 
for complaint against the United States Steel Corporation and others.] 

McKeesport, Pa., August 29, 1919. 
To the Federal Trade Commission, 

Washington. T). C: 
In compliance with the suggestion contained in the letter of the 
acting chairman of the Federal Trade Commission to the president of 
the American Iron and Steel Institute, dated July 26, 1918 [(?) 
1919] , in the matter of the application of the Western Association of 
Eolled Steel Consumers, hereby states its proposition with reference 
to said matter as follows: 

1. The McKeesport Tin Plate Co. is a corporation existing under 
the laws of the State of Pennsjdvania engaged in manufacturing 
rolled-steel products ; that is, tin plates. Its tonnage amounts to ap- 
proximately 225,000 tons per annum. Its plant is located in the 
Pittsburgh district, at McKeesport, Allegheny County, Pa. 

2. In this connection we wish to specificall}^ call your attention to 
the statement of the Weirton Steel Co., which we think covers the 
whole question, and we are frank to confess that we do not know of 
anything we can add to the statement made by these people. There- 
fore, in order to avoid overburdening you with a like statement, and 
which at best would only be a reiteration of the statement filed by 
the Weirton Steel Co., we wish you to please be advised that the 
statement of the Weirton Steel Co. has our unqualified indorsement, 
and we would be pleased, therefore, if you will consider the state- 
ment referred to as representing our position in this matter. 

Eespectfully submitted. 

McKeesport Tin Plate Co., 
E. E, Crawford, President. 

STATEMENT OF AMERICAN STEEL CO. 

Pittsburgh, Pa., August S9, 1919. 
Federal Trade Commission, 

Washington, D. C. 
Dear Sirs : We herewith desire to confirm the position taken by the 
Weil-ton Steel Co. in the matter of the application of the Western 
Association of Eolled Steel Consumers for a complaint against the 
United States Steel Corporation and others. 



179 

Our plants are located in the Pittsburgh district, and we view the 

combined action of said association as an indirect violation of the 

Sherman Antitrust Act because it is an effort upon the part of a 

collection of individuals to arbitrarily compel us to base our prices 

Chicago. 

Yours truly, 

American Steel Co., Pittsburgh, Pa., 

M. B. Kelly, President. 
* 

STATEMENT OF SUPERIOR STEEL CORPORATION. 

Pittsburgh, Pa., September 4, 1919. 
Hon. Victor Murdock, 

Acting Chairman Federal Trade Com/mission,, 

Washi/tigton, D. C . 

Dear Sir : The Superior Steel Corporation are manufacturers of 
hot and cold rolled strip steel. 

The products of the Superior Steel Corporation are used for many 
and various purposes, namel3^ typewriters, adding machines, aero- 
planes, automobiles, bicycles, chains, builders' hardware, cutler}^, etc. 

The Supei-ior Steel Corporation are large consumers of steel billets 
and slabs, purchases aggregating approximately 125,000 to 150,000 
gross tons per year. 

The sales of the Superior Steel Corporation aggregate approxi- 
mately 100,000 to 140,000 net tons of hot and cold rolled strip steel 
per year. 

As buyers of steel billets and slabs, the Superior Steel Corporation 
favors Pittsburgh as the sole basing point. 

As sellers of hot and cold rolled strip steel, the Superior Steel Cor- 
poration favors Pittsburgh as the sole basing point. 

The Superior Steel Corporation favors Pittsburgh as against any 
other single basing point, for the reason that after j'ears of experi- 
ence in the iron and steel industry the trade has designated Pitts- 
burgh as the basing point, and we are of the firm belief that business 
is much better equalized by having one basing point, and that the one 
basing point should be Pittsburgh. 

The reason whj'- the Superior Steel Corporation favors Pittsburgh 
as against Chicago or any other single basing point is because the iron 
and steel industry has long been accustomed to Pittsburgh as a basing 
point, and many plants producing both raw and finished material 
have been established on the assumption that Pittsburgh is and would 
continue to be the basing point. 

It is our opinion that the great majority of buyers of iron and 
steel products will agree that Pittsburgh should be the sole basing 
point. 

Very truly yours, 

C. H. Forster, Yice President. 



180 

STATEMENT OE PITTSBURGH STEEL CO. 

Pittsburgh, Pa., Seftemher 4, 1919. 
Mr. Victor Murdock, 

Acting Chaimhan Federal Trade Commdssion, _^ 

Wa-'ihington, D. C. 

Dear Sir : Our mills are located at Monossen, Pa., about 38 miles 
from Pittsburgh, and at Glnssport, Pa., about 20 miles from Pitts- 
burgh. • 

Our products for sale are pig irou, steel billets, hoops, bands, cot- 
ton ties, and w'iyq. products. 

Monessen, Pa., and Glassport, Pa., are in what is known as the 
Pittsburgh district, and the freight rates east and west are the 
same as from Pittsburgh excepting to places within a few miles 
from our mills. 

Our business is done in all States of the Union and in many for-, 
eign countries. 

In the main, our products are sold f . o. b. Pittsburgh, but sales are 
also freely made f. o. b. our mills, or delivered at destination as in 
our judgment may seem wise or necessary to meet competition and 
market our goods to the best advantage. 

So far as we can determine, our customers are not desirous of a 
Chicago basing point on our products, nor would we care to sell on 
a Chicago basis. To us it seems purely a commercial question. To 
meet the competition of mills in Chicago or other places, such as, 
AVorcester, Mass.; Bethlehem, Pa.; JohnstoAvn, Pa.: Buffalo, N. Y. ; 
Cleveland, Ohio; Youngstown, Ohio; Ironton. Ohio; Pueblo, Colo.; 
Atlanta, Ga. ; and Birmingham, Ala. ; we must give to our customers 
such prices, terms, and conditions as will make our goods cost them, 
no more than our competitors' prices, terms, and conditions laid 
down at destination. 

The j)ractice of quoting on f. o. b. Pittsburgh basis is a simple and 
convenient means of comparing pi"ices for both the buyer and the 
seller, and has prevailed for man}' years. The buyer and the seller 
would be greatly confused, annoyed, and inconvenienced and in no 
way benefited if an additional basing point were made. The estab- 
lishment of one new basing point would, in our opinion, inevitably 
lead to many more, until eventually every place where steel is pro- 
duced would have its own leasing point. The result would be chaotic. 

We are strongly in favor of the present method of making quota- 
tions not alone by virtue of its long standing usage, but because it is 
most logical, sensible, and convenient. We believe that the estab- 
lishment of a Chicago basing point would in the long run benefit 
neither buyer nor seller. This was once tried and abandoned. The 
movement of commodities and prices will follow the supply and the 



181 . 

demand. The basing point does not determine the price of the com- 
modity; it is only a means or rule by which to measure the price. 

For these reasons we favor the retention of Pittsburgh as the sole 
basing point for prices on steel products and enter our protest against 
the establishment of any additional basing point. 
Yours truly, 

PiTTSBtn?GH Steel Co. 
JoHiST Bindley, PresideiU. 

STATEMENT OF KNOXVILLE IRON CO. 

Knoxville, Tenn., Seftemher 4, 1919. 
Hon. Victor Mukdock, 

Acting Chairman Federal T rode C'om/nissio'n, 

Washington, D. G. 

Dear Sir: Owing to my being absent from- the city for so very 
long, I have been unable to answer your letter of the 2Gth to Elbert 
H. Gary, president American Iron and Steel Institute, copy of 
which was sent to us. This letter refers to the question of other bas- 
ing points for iron and steel, whether it should be Pittsburgh or 
some other point. Eeplying to this letter, beg to advise as far as our 
company is concerned, it would be suicidal if the Birmingham basis 
were forced upon us. In explanation of this, beg to submit the fol- 
lowing : 

All manufactui'ing plants tr}- to secure a favorable location for 
building their plant. After this location has been chosen and the 
plant built and the plant is denied the advantages secured on ac- 
count of its location, such denial is bound to work a hardship on that 
plant and weaken such pai'ticular plant's individuality in the indus- 
tiy. The question which comes up before a plant is located is. Shall 
Ave locate the plant close to the raw material or close to our finished 
nu\rket? In our case, notwithstanding the fact that it takes 3 to 4 
tons of raw materials to make 1 ton of finished iron, we chose our 
location away from our raw material and close to our finished mar- 
ket, believing it to be to our customers' best interest to get quick de- 
liver}' of their requirements. We buy scrap iron in Mobile, New 
Orleans, Texas, Carolina, Florida, and are compelled to pay a high 
freight rate on this material to bring it to Knoxville, and we have 
to compete in buying this jnaterial with the eastern mills, having an 
ocean freight rate from the Gulf and Atlantic coast to the Pitts- 
burgh or eastern Pennsylvania district. We buy practically all of 
our pig iron from Birmingham and have to pay the freight on the 
raw material to Knoxville. We buy most of our ore in the Caro- 
linas and Georgia and our furnace sand from Ohio Eiver points. 
We pa}' big freight on all these items, and this freight enters into 



182 

the cost of the maniifacture and selling, and we therefore could not 
possibly sell as low as mills located in the Pittsburgh district, where 
the materials are cheap and handy. The mills located in Indiana 
and Illinois have an advantage over us in being able to secure the 
best material in large quantities and Ioav prices. Please understand 
that nothing we use in the manufacture of our bar iron that we pro- 
duce fi-om the ground at or near our plant; everything must be 
bought and brought here from a distance, and there is no possible 
chance of our company or mills in the South staying in business if 
the Birmingham base is established on bar iron. 

Further, we believe that all other manufacturers of our line of 
goods and also their customers are perfectly satisfied to have the 
Pittsburgh basing point for prices. We hope, therefore, that the 
Commission will decide to let the basing point remain at Pittsburgh, 
where it has been for a great many years. 
Yours truly, 

W. P. Davis, General Manager. 

STATEMENT OF THE CARNAHAN TIN PLATE & SHEET CO. 

Canton, Ohio, August 7, 1919. 
Victor Murdock, Esq., 

Acting Chairman^ 

Federal Trade Commission, Washington, D. C. 
Dear Sir: Through the courtesy of Mr. Elbert H. Gary, president 
of the American Iron and Steel Institute, we have your favor of the 
26th ultimo, addressed to Judge Elbei't H. Gary, president, Ameri- 
can Iron and Steel Institute, 61 Broadway, New York. 

We would like to cast our vote as favoring the continuance of 
Pittsburgh as the basing point for quotations made on the products 
indicated. 

There are a great many arguments in favor of this. There may 
be a few against it, but we believe the best interests of all concerned 
would be better served by a continuance of a rule which has been in 
force for many years, and has Avorked wonderfully well. It has 
served to stabilize delivered prices of purchasers all over the coun- 
try, and we believe it is still the proper point for this basis to work 
from. We remain, 

Yours respectfully, 

Carnahan Tin Plate & Sheet Co., 
W. K. Singleton, 

General Ma/n<iger of Sales. 



183 

STATEMENT OP THE CHAMBER OF COMMERCE OF STEUBENVILLE, 

OHIO. 

Steubenville, Ohio, September 6, 1919. 
Federal Trade Commission, 

Washington, D. C. 
Gentlemen : Please find inclosed copy of resolution passed by the 
Steubenville Chamber of Commerce in relation to the proposed 
change in the practice of using Pittsburgh as a sole basing point in 
quoting prices on steel. 

Hoping that this will receive favorable consideration at your 
hands, we remain, 

Very truly yours, 

, Secretary. 

Steubenville, Ohio, September 3, 1919. 

Eesolution of the Steubenville Chamber of Commerce indorsing 
and advocating Pittsburgh as the sole and only logical basing point 
in the country for prices on steel. 

Application having been made by the Western Association of Rolled 
Steel Consumers for a complaint against the United States Steel Cor- 
poration and others regarding the practice of using Pittsburgh as the 
sole basing point in quoting prices on steel, the Chamber of Commerce 
of Steubenville, after careful consideration, unanimously adopted the 
folloMdng resolution at its regular meeting on Wednesday, September 
3,1919: 

AVhereas the Pittsburgh iron and steel district has always been the largest pro- 
ducer of iron and steel in the United States ; and 

Whereas it has by common usage been the practice of all manufacturers of iron 
and steel, on account of the great preponderance of production of iron and steel 
in the Pittsburgh district, to make Pittsburgh the basing point for prices of 
iron and steel ; and 

"Whereas the practice of making the Pittsburgh district the basing point for iron 
and steel, by reason of its very large production, existed by common usage 
many years before the United States Steel Corporation and other large steel 
interests were organized or located in the Chicago district ; and 

Whereas a basing point is a trade necessity looking to the development, stimula- 
tion, and stabilization of business, and is necessai-y to enable the buyer to 
compare quotations ; and 

Whereas in establishing a basing point we are removing, as far as possible, 
obstacles to the free movement of merchandise from manufacturer to con- 

. sumer, as when all prices are quoted f. o. b. the basing point a comparison of 
prices is all that is necessary, the freight being equalized ; and 

Whereas two or more basing points will work an injury to industry as a whole, 
will mean a division into districts and interferes with buyer in placing his 
oi'ders to advantage with the manufacturers best fitted to meet his needs, 
thus restricting competition ; and 



^184 

Whereas Pittsburgh, first the sole basing point, is the foundation of the steel 
industry, and by reason of location and tonnage output is the logical sole 
basing point, Pittsburgh will always remain a basinij; point, and as two or more 
basing points tend to restrict competition, it should remain the sole basing 
point : and 
Whereas in consideration of the above facts it appears to be of the very highest 
importance to Steubenville, as a part of the Pittsburgh district, that Pittsburgh 
remain the sole basing point for prices on steel : Be il therefore 
■ Resolved, That the Chamber of Commerce of Steubenville file with the Fed- 
eral Trade Commission its formal protest against any change being made in the 
sole use of Pittsburgh as a basing point in naming prices on iron and steel. 

Unanimously adopted by the Chamber of Commerce of Steuben- 
ville, and filed with the Federal Trade Commission September 4, 1919. 

D. W. Case, Secretary. 

STATEMENT OF CHATTANOOGA CHAMBER OF COMMERCE INDUS- 
TRIAL BOARD. 

Chattanooga, Tenn., September 12, 1919. 
Federal Trade Commission, 

Washington, D. C. 

Gentlemen : Eegarding the abolition of the trade custom of using 
Pittsburgh for a basing point for rolling-mill products. 

There seems to be so little argument in favor of this and such a 
volume of argument against it that I hesitate to take up 7/our time 
in filing a protest against abolishing the Pittsburgh basing custom. 
Fabricators of rolling-mill products are probably the loudest in 
application for the abolishment of the practice. If the consumer 
had any guaranty that a saving would be effected in the final cost to 
him of the items covered in this custom he might find a substantial 
argument ; but, alas, it is scarcely to be conceived that the fabricator 
is advocating the death of this thoroughly established custom for 
the benefit of his customei's, who alone pay the bill. I can see no 
good whatever to come from it, except to swell the profits of fabri- 
cators, who have, unquestionably, fared well for many j'-ears past. 
In my opinion, no single thing adds to the stability of the iron 
and steel trade as does this. To the fabricator it is protection; to 
the manufacturer of rolling-mill pi'oducts it is a gentlemen's agree- 
ment, and a legitimate one ; to the section of countiy that could sup- 
port profitably a rolling mill and has none it is a protective tariff. 
For instance, there has been no rolling mill started outside the Pitts- 
bui'gh-Wheeling territory that has not figured on the freight differ- 
ential as an added profit while getting their feet on the ground. 
Do away with the basing point and there will be fewer rolling mills 
built in the next five years than there would he with no change. 
Aside from this, we certainly have a plethora of troubles. "^Vliy 



185 

should we want, this time of all times, to add to the thousand and 
one unsettled things, this thing that has worked profitably for a 
quarter of a century and is absolutely good for that much longer, 
to the benefit alike of the producer, the fabricator, and the consumer ? 
There is no public demand for it. 
Yours truly, 

Chas. W. Howard, 
Manager^ Industrial Bowrd, ■ 
323-52^ James Building. 

STATEMENT OF PAGE STEEL & WIRE CO. 

Pittsburgh, Pa., Seftember IS., 1919. 
Federal Trade Commission, 

Washington. D. O. 

Gentlemen : 1. We most emphatically wish to register our objec- 
tion to any change in basing point, for we located our mills at Mones- 
sen, Pa., with this knowledge, and likewise all locations were so 
decided upon by others, even Chicago and elsewhere, consequently no 
one has been injured, or should really have cause for complaint, as no 
snap judgment has been taken, all having built with Pittsburgh 
firmly established as a basing point, and it should so remain. 

2. Furthermore, should any change take place, and one or more 
other points selected, it would not be long before manj' others would 
be claiming recognition, and eventuallj' there might arise the neces- 
sity of making all sales f . o. b. mill, wherever located. This would 
be going back to primitive stages. 

3. We can not imagine anything more destructive to business than 
any change at this time; in fact, we candidly believe it would be 
disastrous, resulting in most disturbing conditions to business, which 
already is having a struggle for existence, but through no fault of 
your honorable body. However, apparently it is within your proA'- 
ince to help stabilize business by continuing Pittsburgh as the sole 
basing point, hence we appeal to you accordingly. 

Very truly yours, 

Page Steel & Wire Co., 

E. C. Sattley, General Manager. 

STATEMENT OF PAGE STEEL & WIRE CO. 

Adrian, Mich., Septemljer 19, 1919. 
Federal Trade Commission, 

Washington, D. G. 
Honorable Gentlemen: After having gone from this distant field 
and placed millions in the Pittsburgh district, because of its being 
the established basing point, this company begs to forciblj^ protest 



1«6 

against any change looking to the establishment of another or other 
such points. 

The granting of a prayer from Chicago or elsewhere now for a 
change will siirel}^ be followed by others, and without question the 
interest of the majority can best be served by peiTnitting no ruling to 
be made whatsoever touching the amending of present regulations. 

Ti-usting this protest may have your honorable body's most careful 
consideration, we beg to remain, 
Very sincerely yours. 

Page Steel & Wire Co., 
John E. Carr, Treasurer. 

STATEMENT OF THE CHATTANOOGA CHAMBER OF COMMERCE 

INDUSTRIAL BOARD. 

Chattanooga, Tenn., 

Septemler 23, 1919. 
Mr. Victor Mukdock, 

Commissioner, Federal Trade Commission, 

Washington, D. G. 
My Dear Mr. Murdoch : Inclosed find carbon copy of letter to Mr. 
McGinty, secretary Interstate Commerce Commission, relative to bas- 
ing point for steel. 

Yours truly, Chas. W. Howard, 

Manager, Industrial Board. 



September 23, 1919. 

Mr. George B. McGinty, 

Secretary Interstate Commerce Commission, 

Washington, D. C. 

Dear Sir : I understand that application 9-1296, referring to bas- 
ing point for steel has been made to the Interstate Commerce Commis- 
sion, and that this matter is of some interest to the Federal Trade 
Commission. 

I have no interest in rolling mills or fabricating plants. It is sim- 
ply my duty to make the best out of conditions, and the best of con- 
ditions as matters stand to-day are a combination of vexation and 
doubt. To me, the application is ill-timed even if it had merit, and 
to the very best of my knowledge and belief, it is void of merit. 
Under this basing point regulation, the steel business has prospered as 
no other branch of industry. If the bars were taken down to-day and 
every rolling mill in the country permitted to make its own rates at 
their warehouse door, it would not take one nickel per ton from cost 
to the consumer. The fabricator would get the lion's share or all of 



187 . . . , > 

it. Hundreds of rolling mills Lave been located all over the United 
States on the strength of this differential permitted by the basing 
point. There is still room for hundreds of rolling mills throughout 
the country. Destroy the basing point and you destroy 75 per cent 
of the prospect of creating new sources for supplying rolling mill 
products. The consumer is not asking for this; analyze it and you 
will find it is the fabricator and the dealer, and the dealers are using 
the soft pedal. What the country needs jast at this time is stability 
and service, not a destruction of methods that have proved wonder- 
fxilly successful in building up industries for the use of raw material 
and the employment of labor. . I can not get the consent of my mind 
that the Interstate Commerce Commission will open this door for 
additional trouble. 
Yours truly, 



Manager, Industinal Board. 

INTERVENING STATEMENT OF OAK FLOORING MANUFACTURERS. 

[By L. C. BOYLB, of counsel.] 

IN RE BASING POINT ENQUIiiV. 

GENTLKarEN OE THE COMMISSION : Touchiiig the application for a 
complaint involving methods of steel producers in distributing their 
product in relation to a connnon basing point, the commission has 
seen fit to invite other industries to contribute such suggestions as 
might seem pertinent. In compliance with this oppoiiunity, beg to 
submit the following: 

It would not be projjer for me to make comment on the situation 
as same may relate to the steel industry. My sole interest is to clearly 
indicate the practice and the custom as same apply to the various 
branches of the lumber industry. 

Some branches of the lumber industry have for years followed the 
custom of using a common basing point in arriving at market condi- 
tions in distributing their product in common markets. 

At the outset I desire to at once call attention to the fact that, as 
used by the lumber industry, the basing point practice is not em- 
ployed as a means of increasing prices to the consumer. The cus- 
tom's sole value is in the element of market stability that it fur- 
nishes. I can very well illustrate the situation by the market methods 
used by the oak flooring industry. 

The oak flooring mills sell their product f. o. b. mill. Some years 
back the industry centered around Cincinnati and the Cincinnati 
gateway became the natural basing point. In time new producing 
fields were opened, as in Kentucky, Tennessee, and Arkansas. The 
custom, however, of using the Cincinnati basing point continued. 



18B 

in so far as the practice may seem to touch the price element, as 
used in this industrj' such seeming surface relation to price is but 
a paper indication. This becomes at once apparent when the facts are 
understood. 

As stated, the product is sold f . o. b. mill. Naturally the mill that 
has a strategical price advantage, due to location in relation to a 
given market, will use such advantage in competitive selling. The 
mill having a short haul and a lower rate will make a longer profit 
than the mill having a long liaul and a higher rate. When the long- 
haul mill undertakes to sell in the market of a mill adjacent to such 
market such mill does so under tlie handicap of a heavy-rate bur- 
den and must adjust its f . o. b. mill price accordingly. To illustrate : 
A mill at Pine Bluffs, Ark., has a distinct rate advantage over a 
competing mill at Cincinnati, selling in El Paso, Tex. 

Due to the custom of years all consumers are perfectly familiar 
with the rate from Cincinnati to all points of consumption. The 
Pine Bluff mill in adjusting its competitive selling price does so in 
relation to the Cincinnati base, thereby using the same rate basis as 
its competitor. Due to this fact it is the f . o. b. price that controls 
in so far as the rates is involved. As a result, the trade, both pro- 
duction and consunsption, use the same trade language. As sug- 
gested, the practice makes for stability. The consumer is more con- 
cerned in preserving the custom than the producer, and this because 
if the basing point method was abolished there would be injected 
into the price situation a multitude of rates to be figured and con- 
sidered in addition to the f. o. b. price. The trade is perfectly 
familiar with the ]jractice, understands its use, and appreciates its 
advantages. Nothing would be gained in so far as delivered price 
values are concerned. If the short-haul mill was compelled to adjust 
its f. o. b. offer on the basis of the actual rate, the same result as to 
price would exist as now. In other words, if the Conunission has 
the power and would so use it as to forbid a conmion basing point 
inexcusable confusion would result with no countervailing benefit. 
The trade does not ask it and the custom of years should be a guar- 
anty of the wisdom of the practice. 

It has occurred to me that I could help the conunission get a cor- 
rect view of this situation if I were to here quote statements made 
to me b}' practical operators; men who not only understand the 
practice but whose business has been built up in relation thereto : 

STATKiiKNT BY WILLIAM .1. KCKMAN. VICE-rKESIDK.VT, jr. li. KARHIN Ll'MUKK CO., 

CINCINNATI. 

In quoting on s;teel prodiurts luy understanding i.s that a price is given ujjon 
a. f. o. b. Pittsburg basi-s no matter from where it is shipped, and the freight 
from Pittsburg to that point added to sucli price. 

Tiii« is not done in iiny brancli of tlie lumber bu.siness tliat the writer linows 
of. In tlie lumber industry Cincinnati has always been accepted as the prin- 



189 

cipal gateway of distribution. You will probably recognize this from the fact 
that freight rates formerly broke upon Cincinnati or other Ohio River points. 
It is therefore reasonable that if an equalization is essential to the conduct 
of railroad business for a stabilizing effect, a basic point in a largely manu- 
factured commodity is also essential. Let us look at it from the buyer's or 
consumer's point of view.. Any buyer or consumer will acknowledge that he 
prefers to have a stabilizing condition for his purchase of material. He knows, 
then that his competitors are on an equal basis with him. Therefore, does it 
not stand to reason tliat a basic or distrilMiting point forms the best means of 
stabilizing values and e.specially \\here this point is such where the freight 
rates break upon? Again, if this is a reasonable view from the buyer's stand- 
point, does it not follow then that it is a reasonable and constructive view 
fi'om a manufacturing or selling point of view? 

STATEMENT Ol' THOS. FOEMAK, PRESIDENT, THOMAS FOKMAN CO., DETKOIT. 

I have noted with much interest what you wrote relative to the basic point 
for commodities, and want to advise and insist that based on my many years 
of experience, it is always absolutely necessary to have a basing point for prices, 
especially on maple and oak flooring. This lias been the custom on maple floor- 
ing for the past 20 years, upon which we have used Cadillac as basic point 
to the entire satisfaction of both manufacturers and consumers. This same 
works out with Cincinnati as the basic point on oak, and we hope you will- 
use this as a necessity to our industry in your arguments in the future. 

STATEMENT OF F. E. GADD, STATISTICAL SECEETAKY, AMERICAN HARDWOOD MANU- 
TUEEES' ASSOCIATION, MEMPHIS, TENN. 

I am somewhat familiar with the practice of using Pittsburgh as the basing 
point for the steel industry. For a great many years Pittsburgh was the center 
of the steel industry in the United States. There were few plants outside of 
Pittsburgh proper or the Pittsburgh territory. As the country west of the 
Mississippi River began to develop tiie steel corporation, needing more produc-- 
tion, decided to erect additional plants, and selected Chicago for the location 
of these plants. They built plants in Chicago and Milwaukee, and other inde- 
pendent steel manufacturers also built plants at these points, until the steel in- 
dustry in the Chicago district to-day is almost as large as in the Pittsburgh- 
district ; in fact, the greatest plant that the steel industry has to-day is 
at Gary, Ind., a suburb of Chicago. 

During all this time the steel industry had continued to use Pittsburgh as the 
base point for determining prices, and while the steel consumed In the western 
States had been shipped from the Chicago mills, the price had been arrived at 
by using the Pittsburgh base. 

In the lumber industry, instead of having our mills concentrated in two 
points, we have mills all over the United States, and it is the uniform prac-- 
tice of lumber manufacturers to sell their product at an f. o. b. mill equivalent 
with freight added to destination. It is true that in our sales reports we show 
.the equivalent of all sales in the southern territory at Cairo and in the 
eastern territory at Cincinnati, but this is merely for convenience in figuring, 
because the freight rates in these two territories are made on Cairo and Cin- 
cinnati combinations. Any member can take the equivalent price at Cairo or 
Cincinnati and figure back to his mill and arrive at the realization price 
f. 0. b. his mill on the sales made by any member. He then knows what his 
competition is and makes his prices accordingly. The hardwood lumber 
industi'y, however, does nut sell lumber on a basic market price, and I do not 
see how the question involved In the steel industry could apply to the lumber 
business. 



190 

Permit me to emphasize this suggestion: I consider Mr. Gadd one 
of the very able men in the hardwood industry, and if the commis- 
sion desires to have some one come before it that knows the situation 
in so far as the lumber industry is concerned and who really knows 
this problem from every angle, I would respectfully suggest that 
Mr. Gadd be called. 

In addition to the oak flooring and hardwood industry generally 
using common basing points in distributing to common markets, 
the western pine manufacturers indulge the same practice. I here 
submit a very clear and comprehensive statement from Mr. A. W. 
Cooper, secretary -manager of the Western Pine Manufactui-ers 
Association : 

First of all, I might say that the basing of prices ou a common point is a 
custom that is as old as the industry itself in our country. Any group of 
competitive manufacturers seeking markets at a distance are governed in the 
price they ask by the competition and market price, not at their point of manu- 
facture, but in the common markets. For example, for an inland empire 
manufacturer selling lumber in Cliicago, the important point is the value and 
price that his class of lumber is bringing in Chicago, not at the mill. If he 
has a short freight rate to Chicago, he naturally wishes to take advantage 
of it and will sell at as high a price as competition will permit in Chicago, 
absorbing the advantage he may have in rate. Consequently, it has been the 
custom of the trade in developing the trade language to take some central 
point of production from which rates are made to all consuming markets and 
to use that as a basing point in figuring his delivered prices. To forbid him 
to use such a basing point would be to destroy the language of his business. 
It would become impossible for him to have a common price list, which is 
after all the language of his trade. 

To be a little more concrete in the case of the Inland Empire manufacturers : 
Almost all of the freight rates to the consuming territory are predicated ou 
Spokane. Some mills to some markets take less than the Spokane rate. Other 
rnllls take a somewhat higher rate, but in preparing a common price list for 
convenience " and use the price is figured with the Spokane rate as a basis. 
The millman in selling quotes a price delivered and uses as his basis of figur- 
ing that price the freight rate from Spokane. If his actual rate is less he 
will net that much more at the mill, which is one of the natural advantages 
of his location. If his rate is more he will net that much less, winch is a dis- 
advantage of his location, but to deny him the privilege of using a common 
basing point in figuring his delivered prices and working out his price list as 
a convenient instrument in the conduct of his business would be to throw the 
industry into a state of chaos. 

The only ai'gument that I can see against the basing point would be that of 
the buyer who feels that he is entitled to a lower price in ease he buys from a 
niill with a lower rate of freight, but I think a moment's thought will show 
that this is not a well founded argument as the important thing always is, 
what is the thing worth at its point of consumption, and there is certainly 
no reason for compelling the manufacturer with a low rate of freight to his 
market to deduct liis advantage and pass it on to the consumer. Oftentimes 
this advantage is offset by other disadvantages : For example, we have a strik- 
ing result of this in our own territory. While our Montana mills enjoy cer- 
tain rate advantages up to a considerable distance east, as far as their freight 



191 

goes, have disadvantages in the character of their v?ood, cost of logging, etc., 
that sometimes offset any advantage in freight rate. They, like everybody 
else, however, base their prices on the Spokane rate of freight regardless of 
their actual rate. The use of the basing point thus becomes a logical and 
necessary economic instrument in the conduct of business and industry, and 
I should hate to see anything done in the complaint before the Federal Trade 
Commission tliat would effect the right of competitive producers to settle on 
and use a common basing point which, as I have said before, is nothing more 
or less than an adoption of a common languagt upon which to base quotations 
und statements of market condition and the like. 

Before closing permit me to make this further observation. If 
the commission abolishes the basing point method it will at once 
take away from certain branches of the lumber industry their op- 
portunity to study market conditions in the light of past transac- 
tions. Also a trade language that has existed for jeiirs will be 
thrown out of gear thereby disturbing plans for the correct under- 
standing of the cost of production. All statistical work would be 
disarranged. These evil and unnecessarj? consequences would follow 
in the event the commission should take adverse action in this 
matter, and this not only without a demand from consumption but 
indeed without complaint. In fact the consumers would be as griev- 
ously burdened as would be the producers. 

Eespectf ully submitted. 

L. C. BOTIiE. 

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